IMPORTANT NOTICE NOT FOR DISTRIBUTION TO ANY U.S. PERSON OR TO ANY PERSON OR ADDRESS IN THE UNITED STATES. IMPORTANT:

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1 IMPORTANT NOTICE NOT FOR DISTRIBUTION TO ANY U.S. PERSON OR TO ANY PERSON OR ADDRESS IN THE UNITED STATES. NOT FOR DISTRIBUTION TO ANY PERSON THAT IS NOT A QUALIFIED INVESTOR WITHIN THE MEANING OF THE PROSPECTUS DIRECTIVE. IF YOU ARE NOT A QUALIFIED INVESTOR, DO NOT CONTINUE. IMPORTANT: You must read the following before continuing. The following applies to the prospectus following this page, and you are therefore advised to read this carefully before reading, accessing or making any other use of the prospectus. In accessing the prospectus, you agree to be bound by the following terms and conditions, including, any modifications to them any time you receive any information from us as a result of such access. NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE NOTES AND CERTIFICATES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION. THE NOTES AND CERTIFICATES ARE IN BEARER FORM AND ARE SUBJECT TO UNITED STATES TAX LAW REQUIREMENTS, THE NOTES AND CERTIFICATES MAY NOT BE OFFERED, SOLD OR DELIVERED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THE FOLLOWING PROSPECTUS MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND IN PARTICULAR, MAY NOT BE FORWARDED TO ANY U.S. PERSON OR TO ANY UNITED STATES ADDRESS. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS PROSPECTUS IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. Confirmation of your Representation: In order to be eligible to view the prospectus or make an investment decision with respect to the securities, investors must not be a U.S. person (within the meaning of Regulation S under the Securities Act). If the prospectus is being sent at your request, by accepting the and accessing the prospectus, you shall be deemed to have represented to us that you are not a U.S. person, the electronic mail address that you gave us and to which this has been delivered is not located in the United States (including, Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands), any States of the United States or the District of Columbia and that you consent to delivery of such prospectus by electronic transmission. You are reminded that the prospectus has been delivered to you on the basis that you are a person into whose possession the prospectus may be lawfully delivered in accordance with the laws of jurisdiction in which you are located and you may not, nor are you authorised to, deliver the prospectus to any other person. The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the underwriters or any affiliate of the underwriters is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the underwriters or such affiliate on behalf of the Issuer in such jurisdiction. The prospectus is obtained by you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently neither Delft 2017 B.V. nor Morgan Stanley & Co. International plc nor any person who controls them nor any director, officer, employee nor agent of it or affiliate of any such person accepts any liability or 1

2 responsibility whatsoever in respect of any difference between the prospectus distributed to you in electronic format and the hard copy version available to you on request from Morgan Stanley & Co. International plc. 2

3 Principal Amount (see footnote 6 below) Issue Price per cent. Interest until First Optional Redemption Date (see footnotes 1 and 2 below) Interest from First Optional Redemption Date (see footnotes 1 and 2 below) Interest accrual Expected credit ratings (DBRS / Moody s / S&P) (see footnotes 4 and 5 below) First Optional Redemption Date (see footnote 3 below) Final Maturity Date DELFT 2017 B.V. (incorporated with limited liability in the Netherlands) Class A Class B Class C Class D Class E Class Z R1 Certificates EUR EUR EUR EUR EUR EUR N/A 98,946,000 19,010,000 7,401,000 7,401,000 9,038,000 14,024, per cent. 100 per cent. 100 per cent. 100 per cent. 100 per cent. N/A N/A. Euribor for Euribor for Euribor for Euribor for Euribor for N/A N/A N/A three month three month three month three month three month deposit, plus deposit, plus deposit, plus deposit, plus deposit, plus an Initial an Initial an Initial an Initial an Initial Margin of Margin of Margin of Margin of Margin of 0.75 per cent. per annum 1.50 per cent. per annum 2.10 per cent. per annum 2.75 per cent. per annum 3.75 per cent. per annum Euribor for Euribor for Euribor for Euribor for Euribor for N/A N/A N/A three month three month three month three month three month deposit, plus deposit, plus deposit, plus deposit, plus deposit, plus a Step-up a Step-up a Step-up a Step-up a Step-up Margin of Margin of Margin of Margin of Margin of 1.25 per cent per cent per cent per cent per cent. per annum per annum per annum per annum per annum Actual/360 Actual/360 Actual/360 Actual/360 Actual/360 N/A N/A N/A AAA (sf) / Aaa (sf) / AAA (sf) Notes Payment Date falling in January 2020 Notes Payment Date falling in January 2040 AA (sf) / Aa1 (sf) / AA (sf) Notes Payment Date falling in January 2020 Notes Payment Date falling in January 2040 A (sf) / Aa3 (sf) / A (sf) Notes Payment Date falling in January 2020 Notes Payment Date falling in January 2040 BBB (sf) / A3 (sf) / A- (sf) Notes Payment Date falling in January 2020 Notes Payment Date falling in January 2040 BB (low) (sf) / Ba2 (sf) / BBB- (sf) Notes Payment Date falling in January 2020 Notes Payment Date falling in January 2040 N/R N/R N/R Notes Payment Date falling in January 2020 Notes Payment Date falling in January 2040 N/A R2 Certificates N/A 1.) The interest rate payable on each respective class of Rated Notes (other than the Class A Notes) and each accrual period will be based on a per annum rate equal to the lesser of: a. the Euribor for three month deposits plus a certain Margin as described above; and b. the Net WAC Cap, which interest rate shall in each case be a minimum of 0.00 per cent. per annum. The interest rate payable on the Class A Notes will be based on a per annum rate equal to the Euribor for three month deposits plus a certain Margin as described above, which interest rate shall in each case be a minimum of 0.00 per cent. per annum. 2.) As described in "1)" above, payments of interest on the Rated Notes are subject to the application of the Net WAC Cap on each Notes Payment Date. To the extent a class of Rated Notes becomes subject to the Net WAC Cap, the corresponding shortfall will be deferred and non-payment of such amounts shall not be deemed an Event of Default under any circumstances. Such deferred shortfall amounts may subsequently be payable through the application of Net WAC Additional Amounts. The Net WAC Additional Amounts may also be deferred and non-payment of such amounts shall not be deemed an Event of Default under any circumstances. Such Net WAC Additional Amounts are not rated. 3.) The First Optional Redemption Date is the Notes Payment Date falling in January ) The above ratings shall, among other things: a. to the holders of the Class A Notes, address the likelihood of full and timely payments of interest; N/A N/A N/A 3

4 b. to the holders of the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, address the likelihood of full and ultimate payment of interest (other than any Net WAC Additional Amounts) in relation to such Notes; and c. to the holders of the Rated Notes, address the likelihood of full and ultimate payment of principal in relation to such Notes. 5.) The Class Z Notes and the Certificates will not be rated by any Credit Rating Agency. 6.) Each R1 Certificate and R2 Certificate shall have a notional amount of EUR 100,000, as further set out in this Prospectus. 4

5 Morgan Stanley Principal Funding, Inc. as Seller Issue Date: The Issuer will issue the Notes and Certificates in the classes set out above on 23 January 2017 (or such later date as may be agreed between the Lead Manager and the Issuer) (the Closing Date). Stand alone/ programme issuance: Underlying Assets: Security for the Notes and Certificates: Denomination: Form: Stand alone issuance. The Issuer will make payments on the Notes and Certificates (in accordance with the relevant Priority of Payments) from, among other things, payments of any principal and interest received from a portfolio comprising mortgage loans originated by the Originator and secured over residential properties located in the Netherlands. Legal title to the resulting Mortgage Receivables will be assigned by the Seller to the Issuer on the Closing Date. See further Section 6.2 (Description of Mortgage Loans). The Noteholders and Certificateholders will, together with the other Secured Creditors, benefit from security rights created in favour of the Security Trustee over, among other things, the Mortgage Receivables, the Issuer Rights, the Issuer Accounts and the Collection Foundation Account. See further Section 4.9 (Security). The Notes and Certificates will have a denomination of EUR 100,000 and, in relation to the Notes, in integral multiples of EUR 1,000 in excess of such denomination. The Notes and Certificates are initially issued in bearer form and represented by Global Notes and Global Certificates, respectively. In limited circumstances, the Notes and Certificates will be issued in definitive form, serially numbered, and in respect of the Rated Notes, with coupons attached. Interest: Each class of Rated Notes will carry a floating rate of interest as set out above, payable quarterly in arrears on each Notes Payment Date. The Class Z Notes and the Certificates will not carry any interest. See further Sections 4.1 (Terms and Conditions of the Notes) and 4.2 (Terms and Conditions of the Certificates) and Condition 5 (Interest). Interest Deferral: Interest due and payable on the Class A Notes may not be deferred. Interest due and payable on the Rated Notes (other than the Class A Notes) may be deferred in accordance with Condition 5(f) (Subordination by Deferral). In accordance with Condition 5(f) (Subordination by Deferral), the Issuer may also defer payment of any Net WAC Additional Amounts (calculated as set out in Condition 5 (Interest)). Deferred Interest on the Rated Notes (other than the Class A Notes) shall accrue additional interest at the per annum rate equal to the lesser of the Euribor for three month deposits plus the relevant Margin and the Net WAC Cap, and shall become payable on the next Notes Payment Date (unless and to the extent that Condition 5(f) (Subordination by Deferral) again 5

6 applies) or on such earlier date as the relevant Class of Rated Notes becomes due and repayable in full in accordance with the Conditions. Net WAC Additional Amounts: On each Notes Payment Date, to the extent the Net WAC Cap has been applied to the relevant floating rate of interest (plus Margin) otherwise due and payable on the relevant Class of Rated Notes, the Noteholders of the Rated Notes (other than the Class A Notes) will be entitled to receive payments of Net WAC Additional Amounts in respect of the relevant Rated Notes (other than the Class A Notes) subject to and in accordance with the applicable Priority of Payments. Any Net WAC Additional Amounts not paid on a Notes Payment Date will be deferred until the immediately following Notes Payment Date, and will accrue interest in accordance with Condition 5(f) (Subordination by Deferral). Any failure by the Issuer to pay any Net WAC Additional Amounts on a Notes Payment Date will not constitute an Event of Default. The Credit Ratings on the Rated Notes do not address the likelihood of receipt of any Net WAC Additional Amounts. Credit Enhancement: Liquidity Support: (iii) Subordination of junior ranking Notes. Excess available revenue. Amounts standing to the credit of the Non-Liquidity Reserve Fund Ledger. Amounts standing to the credit of the Liquidity Reserve Fund Ledger in relation to the Class A Notes, provided that the PDL Condition is satisfied. For the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, principal applied to make up any Revenue Shortfall, provided that, in relation to the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, the PDL Condition is satisfied. Redemption Provisions: Unless already then redeemed in full, payments of any outstanding principal on the Notes will be made on the Final Maturity Date as set out above, subject to and in accordance with the Conditions. All (but not some only) of the Notes may be redeemed by the Issuer: under the Tax Call Option, and must be redeemed by the Issuer: (iii) (iv) under the Issuer Sale Process; under the Mortgage Portfolio Purchase Option; and under the Clean-Up Call Option, subject to and in accordance with the Conditions, the Certificate Conditions, the Trust Deed, the Liquidation Agent Agreement and the Mortgage Receivables Purchase Agreement. The Notes will mature on the Final Maturity Date. See further Condition 7 (Redemption). The Certificates will not have a final maturity date. Subscription and Morgan Stanley & Co. International plc has agreed to purchase at the Closing Date, subject to 6

7 Sale: certain conditions precedent being satisfied, the Notes and Certificates, except for the Retained Notes and Retained Certificates, which the Retention Holder has agreed to purchase at the Closing Date. Morgan Stanley & Co. International plc may, from time to time, sell any of the Notes and Certificates in the secondary market at variable prices, which may, in turn, affect the liquidity and price of any such Notes and Certificates in the secondary market. Morgan Stanley & Co. International plc may, from time to time, sell any of the Notes and Certificates in individually negotiated transactions at variable prices in the secondary market. Credit Rating Agencies: DBRS Ratings Limited (DBRS), Moody s Investors Service Limited (Moody s) and Standard and Poor s Credit Market Services Europe Limited (S&P, and together with DBRS and Moody s, the Credit Rating Agencies). As of the date of this Prospectus, each of DBRS, Moody s and S&P is established in the European Union and registered under Regulation (EC) No 1060/2009, as amended, of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (the CRA Regulation). As such, each of the Credit Rating Agencies is included in the list of credit rating agencies published by the European Securities and Markets Authority (ESMA) on its website (at in accordance with the CRA Regulations. In general, European regulated investors are restricted from using a rating for regulatory purposes if such rating is not issued by a credit rating agency established in the European Union and registered under the CRA Regulation unless the rating is provided by a credit rating agency operating in the European Union before 7 June 2010 which has submitted an application for registration in accordance with the CRA Regulation and such registration is not refused. Credit Ratings: Ratings are expected to be assigned to the Rated Notes as set out above on or before the Closing Date. The Class Z Notes and the Certificates will not be rated by the Credit Rating Agencies. The ratings reflect the views of the Credit Rating Agencies and are based on the Mortgage Loans, the related Security and the structural features of the transaction. The ratings assigned to the Rated Notes (including in respect of the Step-up Margins) shall, among other things: to the holders of the Class A Notes, address the likelihood of full and timely payments of interest, on each Notes Payment Date in accordance with the Conditions; to the holders of the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes (together with the holders of the Class A Notes, the Rated Noteholders ), address the likelihood of full and ultimate payment of interest (other than any Net WAC Additional Amounts) in relation to the Rated Notes on the Final Maturity Date; and to the Rated Noteholders, address the likelihood of full and ultimate payment of principal in relation to the Rated Notes, on or prior to the Final Maturity Date. The assignment of ratings to the Rated Notes is not a recommendation to invest in such Notes. Any credit rating assigned to the Rated Notes may be reviewed, revised, suspended 7

8 or withdrawn at any time. Any such review, revision, suspension or withdrawal could adversely affect the market value of such Notes. Payments of Net WAC Additional Amounts in respect of the Rated Notes (other than the Class A Notes) are not rated and the rating of the relevant Class of Notes does not address the likelihood of receipt of any amounts in respect of the Net WAC Additional Amounts. Listing: Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on its regulated market. The Notes are expected to be listed on or about the Closing Date. This document constitutes a prospectus within the meaning of and is issued in compliance with the Prospectus Directive and relevant implementing measures in Ireland for the purpose of giving information with regard to the issue of the Notes (the Prospectus). This Prospectus has been approved by the Central Bank of Ireland (the Central Bank), as competent authority under the Prospectus Directive 2003/71/EC. The Central Bank only approves this Prospectus as meeting the requirements imposed under Irish and EU law pursuant to the Prospectus Directive 2003/71/EC. Such approval relates only to the Notes which are to be admitted to trading on a regulated market for the purposes of Directive 2004/39/EC and / or which are to be offered to the public in any Member State of the EEA. Eurosystem Eligibility: Limited recourse obligations: Subordination: The Class A Notes are intended to be held in a manner which will allow Eurosystem eligibility. This means that the Class A Notes are intended upon issue to be deposited with Euroclear or Clearstream, Luxembourg as common safekeeper. It does not necessarily mean that the Class A Notes will be recognised as Eurosystem Eligible Collateral either upon issue or at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria. The other classes of Notes and Certificates are not intended to be held in a manner which will allow Eurosystem eligibility. The Notes and Certificates will be limited recourse obligations of the Issuer and will not be the obligations of, or guaranteed by, or be the responsibility of, any other entity. The Issuer will have limited sources of funds available to it to satisfy its obligations under the Notes and Certificates. See further Section 2 (Risk Factors). The Class A Notes will rank pari passu without preference or priority among themselves in relation to payment of interest and principal at all times, as provided in the Conditions and the Transaction Documents. The Class B Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class B Net WAC Additional Amount (if any) at all times, but subordinate to the Class A Notes, as provided in the Conditions and the Transaction Documents (except that all payments in respect of any Class B Net WAC Additional Amount will rank subordinate to all payments due under the Notes other than all payments in respect of any Class C Net WAC Additional Amount, any Class D Net WAC Additional Amount, any Class E Net WAC Additional Amount and any principal amounts due under the Class Z Notes). The Class C Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class C Net WAC Additional Amount (if any) at all times, but subordinate to the Class A Notes and the Class B Notes, as provided in the Conditions and the Transaction Documents (except that all payments in respect of any Class C Net WAC Additional Amount will rank subordinate to all payments due under the Notes other than all payments in respect of any Class D Net WAC Additional Amount, any Class E Net 8

9 WAC Additional Amount and any principal amounts due under the Class Z Notes). The Class D Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class D Net WAC Additional Amount (if any) at all times, but subordinate to the Class A Notes, the Class B Notes and the Class C Notes, as provided in the Conditions and the Transaction Documents (except that all payments in respect of any Class D Net WAC Additional Amount will rank subordinate to all payments due under the Notes other than all payments in respect of any Class E Net WAC Additional Amount and any principal amounts due under the Class Z Notes). The Class E Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class E Net WAC Additional Amount (if any) at all times, but subordinate to the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes, as provided in the Conditions and the Transaction Documents (except that all payments in respect of any Class E Net WAC Additional Amount will rank subordinate to all payments due under the Notes other than any principal amounts due under the Class Z Notes). The Class Z Notes will rank pari passu without preference or priority among themselves in relation to payment of principal at all times, but subordinated to the Rated Notes and any Net WAC Additional Amount, as provided in the Conditions and the Transaction Documents. The Class Z Notes do not pay interest. There is no assurance that the subordination provisions summarised above will protect the holders of the Notes from all the risks of losses on the Notes. The R1 Certificates and the R2 Certificates will rank pari passu without preference or priority among themselves, but subordinate to the Notes and any Net WAC Additional Amount, as provided in the Conditions and the Transaction Documents. The holders of the R1 Certificates will have the right to 100 per cent. of (and the holders of the R2 Certificates will have no right to) any Certificate Payment on any Notes Payment Date before the Class Z Notes have been redeemed in full (in accordance with the relevant Priority of Payments), and on and after the date of such redemption of the Class Z Notes in full, the holders of the R2 Certificates will have the right to 100 per cent. of (and the holders of the R1 Certificates will have no right to) any Certificate Payment. Retention and Information Undertaking: EU Risk Retention Requirements In respect of the issue of the Notes, the Retention Holder, in its capacity as the originator within the meaning of Article 405 CRR, has separately undertaken to the Issuer, the Security Trustee, the Arranger and the Lead Manager that, for as long as the Notes are outstanding and on an ongoing basis, it will at all times retain an interest that qualifies as a material net economic interest in the securitisation transaction which, in any event, shall not be less than 5 per cent., in accordance with Article 405 of the CRR, Article 51 of the AIFMR and Article 254 of the Solvency II Regulation by holding no less than 5 per cent of the nominal value of each Class of Notes sold or transferred to investors. The Retention Holder has separately undertaken to the Issuer, the Security Trustee, the Arranger and the Lead Manager that it will comply with the requirements set forth in Article 52(a) up to (and including) (d) of the AIFMR, Articles 408 and 409 of the CRR and (iii) Articles 254 and 256 paragraph 3 sub (a) up to (and including) sub (c) and sub (e) of the Solvency II Regulation. In addition to the information set out in and forming part of this Prospectus, the Retention Holder has undertaken to make materially relevant information available to investors with a view to such investor complying with Article 405 up to (and including) 409 of the CRR, Article 51, 52 and 53 9

10 of the AIFMR and Articles 254 and 256 of the Solvency II Regulation, which information can be obtained from the Retention Holder upon request. Each prospective Noteholder should ensure that it complies with the CRR, the AIFMR and the Solvency II Regulation to the extent such rules apply to it. U.S. Risk Retention Requirements In respect of the issue of the Notes and Certificates, the Retention Holder in its capacity as the sponsor within the meaning of the U.S. Risk Retention Requirements is subject to the requirement thereunder that the Retention Holder (or a majority-owned affiliate within the meaning given to such term by the U.S. Risk Retention Requirements) must retain, during the Risk Retention Period (as defined in this Prospectus), a 5 per cent. risk retention interest, which the Retention Holder intends to satisfy by retaining an eligible vertical interest in each Class of Notes and Certificates issued by the Issuer in the required amount of not less than 5 per cent. of the nominal amount of each such Class of Notes and such Certificates. The Retention Holder has separately undertaken to the Issuer, the Security Trustee, the Arranger and the Lead Manager that it will make available to the Issuer and the Security Trustee such information as required to be disclosed to holders of the Notes and the Certificates under the U.S. Risk Retention Requirements, and the Issuer will, following receipt of such information, make a copy of such information available to the holders of the Notes and the Certificates. See further Section 4.5 (Regulatory and Industry Compliance). Volcker Rule: The Issuer is not, and after giving effect to any offering and sale of the Notes and Certificates and the application of the proceeds thereof will not be, a covered fund for purposes of regulations adopted under Section 13 of the Bank Holding Company Act of 1956, as amended (commonly known as the Volcker Rule). In reaching this conclusion, although other statutory or regulatory exclusions and / or exemptions under the Investment Company Act of 1940, as amended (the Investment Company Act), and the Volcker Rule and its related regulations may be available, the Issuer has determined that the Issuer would satisfy all of the elements of the exclusion from the definition of investment company under the Investment Company Act provided by Section 3(c)(5)(C) thereunder, and, accordingly, the Issuer may rely on the exemption from the definition of a covered fund under the Volcker Rule made available to entities that do not rely solely on Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act for their exclusion and / or exemption from registration under the Investment Company Act. Prohibition of sales to EEA retail investors: The Notes and Certificates are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the EEA. For these purposes, a retail investor means a person who is one (or more) of: a retail client as defined in point (11) of Article 4(1) of MiFID II; or a customer within the meaning of the Insurance Mediation Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II. Consequently no key information document required by the PRIIPs Regulation for offering or selling the Notes and Certificates or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes and Certificates or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPS Regulation. For a discussion of some of the risks associated with an investment in the Notes and Certificates, see Section 2 (Risk Factors). The language of this Prospectus is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be given to such terms under applicable law. 10

11 Unless otherwise indicated in this Prospectus or the context otherwise requires, capitalised terms used in this Prospectus have the meaning given to such terms in paragraph 9.1 (Definitions) of the Glossary of Defined Terms set out in this Prospectus. The principles of interpretation set out in paragraph 9.2 (Interpretation) of the Glossary of Defined Terms in this Prospectus apply to this Prospectus. The date of this Prospectus is 19 January Arranger Morgan Stanley & Co. International plc Lead Manager Morgan Stanley & Co. International plc 11

12 RESPONSIBILITY STATEMENTS The Notes and Certificates will be the obligations of the Issuer only. The Issuer is responsible for the information contained in this Prospectus. To the best of its knowledge and belief (having taken all reasonable care to ensure that such is the case) the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information. Any information from third parties contained and specified as such in this Prospectus has been accurately reproduced and as far as the Issuer is aware and is able to ascertain from information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. The Issuer accepts such responsibility accordingly. The Seller is also responsible for the information contained in the following sections of this Prospectus: all paragraphs relating to retention and disclosure requirements under the CRR, the AIFMR and the Solvency II Regulation, paragraph Portfolio Information in Section 1.6 (Transaction Overview), Section 3.4. (Seller), Section 4.5 (Regulatory and Industry Compliance), Section 6.1 (Stratification Tables), Section 6.2 (Description of Mortgage Loans) and the paragraph Origination in Section 6.3 (Origination and Servicing). To the best of the Seller s knowledge and belief (having taken all reasonable care to ensure that such is the case) the information contained in these paragraphs and sections, as applicable is in accordance with the facts and does not omit anything likely to affect the import of such information. The Seller accepts responsibility accordingly. For the information set forth in Section 3.5 (Servicer), Section 3.6 (Issuer Administrator) and the paragraph Servicing in Section 6.3 (Origination and Servicing), the Issuer has relied on information from Adaxio B.V. Adaxio B.V. is responsible solely for the information set forth in Section 3.5 (Servicer), Section 3.6 (Issuer Administrator) and the paragraph Servicing in Section 6.3 (Origination and Servicing), and not for information set forth in any other section. Consequently, Adaxio B.V. does not assume any liability in respect of the information contained in any paragraph or section other than Section 3.5 (Servicer), Section 3.6 (Issuer Administrator) and the paragraph Servicing in Section 6.3 (Origination and Servicing). To the best of its knowledge and belief (having taken all reasonable care to ensure that such is the case), the information set forth in Section 3.5 (Servicer), Section 3.6 (Issuer Administrator) and the paragraph Servicing in Section 6.3 (Origination and Servicing) is in accordance with the facts and does not omit anything likely to affect the import of such information. Adaxio B.V. accepts responsibility accordingly. ABN AMRO Bank N.V. has been engaged by the Issuer as Paying Agent for the Notes and Certificates, upon the terms and subject to the conditions set out in the Paying Agency Agreement, for the purpose of paying sums due on the Notes and Certificates and of performing all other obligations and duties imposed on it by the Conditions and the Paying Agency Agreement and Reference Agent to perform the duties expressed to be performed by it in Condition 5 (Interest) and the Paying Agency Agreement. ABN AMRO Bank N.V. in its capacity of Paying Agent and Reference Agent is acting for the Issuer only and will not regard any other person as its client in relation to the offering of the Notes and Certificates, other than the Security Trustee in accordance with the Trust Deed and the Paying Agency Agreement. Neither ABN AMRO Bank N.V. nor any of its directors, officers, agents or employees makes any representation or warranty, express or implied, or accepts any responsibility, as to the accuracy, completeness or fairness of the information or opinions described in this Prospectus, in any investor report or for any other statements made or purported to be made either by itself or on its behalf in connection with the Issuer or the offering of the Notes and Certificates. Accordingly, ABN AMRO Bank N.V. disclaims all and any liability, whether arising in tort or contract or otherwise, in respect of this Prospectus and or any such other statements. No person has been authorised to give any information or to make any representation not contained in or not consistent with this Prospectus or any other information supplied in connection with the offering of the Notes and Certificates and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer, the Seller, the Originator, the Arranger, the Lead Manager (nor any of their respective affiliates). 12

13 The distribution of this document and the offering of the Notes and Certificates in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus (or any part of it) comes are required to inform themselves about, and to observe, any such restrictions. A further description of the restrictions on offers, sales and deliveries of the Notes and Certificates and on the distribution of this Prospectus is set out in Section 4.4 (Subscription and Sale) below. No one is authorised by the Issuer or the Seller to give any information or to make any representation concerning the issue of the Notes or Certificates other than those contained in this Prospectus in accordance with applicable laws and regulations. Each investor contemplating purchasing any of the Notes and Certificates should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and its own independent investigation of the Mortgages Receivables. Neither this Prospectus nor any other information supplied in connection with the issue of the Notes and Certificates constitutes an offer or invitation by or on behalf of the Issuer or any of the Arranger or the Lead Manager (nor any of their respective affiliates) to any person to subscribe for or to purchase any Notes or any Certificates. Neither the delivery of this Prospectus at any time nor any sale made in connection with the offering of the Notes and Certificates shall imply that the information contained this Prospectus is correct at any time subsequent to the date of this Prospectus. Neither the Issuer nor the Seller has an obligation to update this Prospectus after the date on which the Notes or Certificates are issued or admitted to trading. Morgan Stanley & Co. International plc (and its affiliates) has not separately verified the information set out in this Prospectus. To the fullest extent permitted by law, Morgan Stanley & Co. International plc (and its affiliates) does not accept any responsibility for the content of this Prospectus or for any statement or information contained in or consistent with this Prospectus that is made or created in connection with the offering of the Notes and Certificates. Morgan Stanley & Co. International plc (and its affiliates) has not independently verified, and does not make any representation or warranty in respect of the contents of this Prospectus or any transaction contemplated in it. Morgan Stanley & Co. International plc (and its affiliates) disclaims any and all liability whether arising in tort or contract or otherwise in connection with this Prospectus or any such information or statements. Morgan Stanley & Co. International plc (and its affiliates) makes expressly clear that it does not undertake to review the financial conditions or affairs of the Issuer during the life of the Notes or Certificates. Investors should review, among other things, the most recent financial statements of the Issuer when deciding whether or not to purchase, hold or sell any Notes or Certificates during the life of the Notes or Certificates, as applicable. The Notes and the Certificates have not been and will not be registered under the Securities Act and will not include Notes and Certificates in bearer form that are subject to United States tax law requirements. The Notes and Certificates may not be offered, sold or delivered within the United States or to U.S. persons as defined in Regulation S, except in certain transactions permitted by U.S. tax regulations and the Securities Act. See further Section 4.4 (Subscription and Sale) below. THE OBLIGATIONS UNDER THE NOTES AND CERTIFICATES WILL BE SOLELY THE RESPONSIBILITY OF THE ISSUER. THE NOTES AND CERTIFICATES WILL NOT CREATE OBLIGATIONS FOR, BE THE RESPONSIBILITY OF, OR BE GUARANTEED BY, ANY OTHER ENTITY OR PERSON, IN WHATEVER CAPACITY ACTING, INCLUDING, THE SELLER, THE SERVICER, THE ISSUER ADMINISTRATOR, THE DIRECTORS, THE PAYING AGENT, THE REFERENCE AGENT, THE LEAD MANAGER, THE ARRANGER, THE ISSUER ACCOUNT BANK, THE COLLECTION FOUNDATION, THE COLLECTION FOUNDATION ACCOUNT BANK, THE SECURITY TRUSTEE, THE LIQUIDATION AGENT, THE BACK-UP 13

14 ISSUER ADMINISTRATOR AND THE BACK-UP SERVICER FACILITATOR, IN WHATEVER CAPACITY ACTING. FURTHERMORE, NONE OF THE SELLER, THE SERVICER, THE ISSUER ADMINISTRATOR, THE DIRECTORS, THE PAYING AGENT, THE REFERENCE AGENT, THE LEAD MANAGER, THE ARRANGER, THE ISSUER ACCOUNT BANK, THE COLLECTION FOUNDATION, THE COLLECTION FOUNDATION ACCOUNT BANK, THE SECURITY TRUSTEE, THE LIQUIDATION AGENT, THE BACK-UP ISSUER ADMINISTRATOR AND THE BACK-UP SERVICER FACILITATOR, NOR ANY OTHER PERSON IN WHATEVER CAPACITY ACTING, WILL ACCEPT ANY LIABILITY WHATSOEVER TO NOTEHOLDERS OR CERTIFICATEHOLDERS IN RESPECT OF ANY FAILURE BY THE ISSUER TO PAY ANY AMOUNTS DUE UNDER THE NOTES OR CERTIFICATES, AS APPLICABLE. 14

15 TABLE OF CONTENTS Responsibility Statements Transaction Overview Structure Diagram Risk Factors Principal Parties Notes and Certificates Credit Structure Portfolio Information Portfolio Documentation General Risk Factors Principal Parties Issuer Shareholder Security Trustee Seller Servicer Issuer Administrator Back-Up Servicer Facilitator Other Parties The Notes Terms and Conditions of the Notes Terms and Conditions of the Certificates Form of Notes and Certificates Subscription and Sale Regulatory and Industry Compliance Estimated weighted average lives of the Notes Use of Proceeds Taxation in the Netherlands Security Credit Structure Available Funds Priority of Payments Loss Allocation Liquidity Support Transaction Accounts Administration Agreement Portfolio Information Stratification Tables Description of Mortgage Loans Origination and Servicing Dutch Residential Mortgage Market Portfolio Documentation Purchase and Sale Purchase Price No repurchase obligation Mortgage Portfolio Purchase Option Mortgage Portfolio Purchase Price Issuer Sale Process Market Sale Process Liquidation Agent Agreement

16 7.9 Clean-up Call Option Tax Call Option Assignment Notification Events Administration of Mortgage Portfolio Representations and Warranties Mortgage Loan Criteria Servicing Agreement General Glossary of Defined Terms Definitions Interpretation Registered Offices

17 1. TRANSACTION OVERVIEW This overview must be read as an introduction to this Prospectus and any decision to invest in the Notes or Certificates must be based on a consideration of this Prospectus as a whole, including any supplement to this Prospectus. This overview is not purported to be complete and should be read in conjunction with, and is qualified in its entirety, by the detailed information presented elsewhere in this Prospectus. Unless otherwise indicated in this Prospectus or the context otherwise requires, capitalised terms used in this Prospectus have the meaning given to such terms in paragraph 9.1 (Definitions) of the Glossary of Defined Terms set out in this Prospectus. The principles of interpretation set out in paragraph 9.2 (Interpretation) of the Glossary of Defined Terms in this Prospectus shall apply to this Prospectus. 17

18 1.1 Structure Diagram The following structure diagram provides an indicative summary of the principal features of the transaction. The diagram must be read in conjunction with and is qualified in its entirety by the detailed information presented elsewhere in this Prospectus. Borrowers Stichting ELQ Ontvangsten (Collection Foundation) Adaxio B.V. (Issuer Administrator)/ Intertrust Administrative Services B.V. (Back-Up Issuer Administrator) Morgan Stanley Principal Funding Inc (Seller) Stater Nederland B.V. (Interim Sub-MPT Servicer) Adaxio B.V. (Servicer) / Intertrust Management B.V. (Back-Up Servicer Facilitator) Principal and interest (and other collections) on Mortgage Receivables Principal and interest (and other collections) on Mortgage Receivables Administration Agreement Purchase Price Mortgage Receivables (Mortgage Receivables Purchase Agreement) Mortgage Receivables and Beneficiary Rights Interim Sub-MPTServicing Agreement Servicing Agreement Stichting Delft 2017 (Shareholder) 100% ownership Delft 2017 B.V. (Issuer) Parallel Debt First priority security over Mortgage Receivables, Issuer Accounts and Issuer Rights Proceeds from issue of Notes and Certificates Principal, interest and Certificate Payments (as applicable) Stichting Security Trustee Delft 2017 (Security Trustee) Trust Deed Class A Noteholders Class B Noteholders Class C Noteholders Class D Noteholders Class E Noteholders Class Z Noteholders R1 / R2 Certificateholders ABN AMRO Bank N.V. (Issuer Account Bank) Issuer Account Agreement Reserve Fund 18

19 1.2 Risk Factors There are certain factors which prospective Noteholders and Certificateholders should take into account. These risk factors relate to, among other things, the Notes and Certificates. One of these risk factors concerns the fact that the liabilities of the Issuer under the Notes and Certificates are limited recourse obligations such that the ability of the Issuer to meet such obligations will be dependent on the receipt by it of funds under the Mortgage Receivables, the proceeds of the sale of any Mortgage Receivables and / or the receipt by it of other funds. Despite certain mitigants in respect of these risks, there remains, among others, a credit risk, liquidity risk, prepayment risk, maturity risk and interest rate risk relating to the Notes and Certificates. Moreover, there are certain structural, legal and tax risks relating to the Mortgage Receivables and the Mortgaged Assets. See further Section 2 (Risk Factors). 19

20 1.3 Principal Parties Issuer: Shareholder: Security Trustee: Seller: Originator: Servicer: Back-Up Servicer Facilitator: Interim Sub-MPT Servicer: Issuer Administrator: Back-Up Issuer Administrator: Delft 2017 B.V., incorporated under Dutch law as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), having its corporate seat in Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number The entire issued share capital of the Issuer is held by the Shareholder. Stichting Delft 2017, established under Dutch law as a foundation (stichting), having its corporate seat in the municipality of Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number Stichting Security Trustee Delft 2017, established under Dutch law as a foundation (stichting), having its corporate seat in the municipality of Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number Morgan Stanley Principal Funding, Inc., a company incorporated in Delaware, United States of America and having its principal office at 1585 Broadway, New York, 10036, United States of America. ELQ Portefeuille I B.V., incorporated under Dutch law as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), having its corporate seat in Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number Adaxio B.V., incorporated under Dutch law as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), having its corporate seat in Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number Intertrust Management B.V., incorporated under Dutch law as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), having its corporate seat in Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number Stater Nederland B.V., incorporated under Dutch law as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), having its corporate seat in Amersfoort, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number Adaxio B.V., incorporated under Dutch law as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), having its corporate seat in Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number If the Issuer Administrator defaults in the performance of the Issuer Services, it will be replaced by the Back-Up Issuer Administrator. Intertrust Administrative Services B.V., incorporated under Dutch law as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), having its corporate seat in Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number 20

21 Issuer Account Bank: Collection Foundation: Collection Foundation Account Bank: Directors: ABN AMRO Bank N.V., a public company with limited liability (naamloze vennootschap) incorporated under Dutch law, with registered office at Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number Stichting ELQ Ontvangsten, established under Dutch law as a foundation (stichting), having its corporate seat in Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number ABN AMRO Bank N.V., a public company with limited liability (naamloze vennootschap) incorporated under Dutch law, with registered office at Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number Intertrust Management B.V., the sole director of the Issuer and the Shareholder. Amsterdamsch Trustee s Kantoor B.V., the sole director of the Security Trustee. Paying Agent: Reference Agent: Listing Agent: Arranger: Lead Manager: Retention Holder: Common Service Provider: Common Safekeeper: ABN AMRO Bank N.V., a public company with limited liability (naamloze vennootschap) incorporated under Dutch law, with registered office at Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number ABN AMRO Bank N.V., a public company with limited liability (naamloze vennootschap) incorporated under Dutch law, with registered office at Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number Arthur Cox Listing Services Limited. Morgan Stanley & Co. International plc. Morgan Stanley & Co. International plc. Morgan Stanley Principal Funding, Inc., a company incorporated in Delaware, United States of America and having its principal office at 1585 Broadway, New York, 10036, United States of America. Bank of America National Association, London Branch, a national banking association organised and existing under the laws of the United States of America, acting through its London branch. Euroclear in respect of the Class A Notes and Bank of America National Association, London Branch in respect of the Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class Z Notes and Certificates. 21

22 1.4 Notes and Certificates Certain features of the Notes and Certificates are summarised below: Principal Amount (see footnote 6 below) Issue Price per cent. Interest until First Optional Redemption Date (see footnotes 1 and 2 below) Interest from First Optional Redemption Date (see footnotes 1 and 2 below) Interest accrual Expected credit ratings (DBRS / Moody s / S&P) (see footnotes 4 and 5 below) First Optional Redemption Date (see footnote 3 below) Final Maturity Date Class A Class B Class C Class D Class E Class Z R1 Certificates EUR EUR EUR EUR EUR EUR N/A 98,946,000 19,010,000 7,401,000 7,401,000 9,038,000 14,024, per cent. 100 per cent. 100 per cent. 100 per cent. 100 per cent. N/A. N/A Euribor for Euribor for Euribor for Euribor for Euribor for N/A N/A N/A three month three month three month three month three month deposit, plus deposit, plus deposit, plus deposit, plus deposit, plus an Initial an Initial an Initial an Initial an Initial Margin of Margin of Margin of Margin of Margin of 0.75 per cent. per annum 1.50 per cent. per annum 2.10 per cent. per annum 2.75 per cent. per annum 3.75 per cent. per annum Euribor for Euribor for Euribor for Euribor for Euribor for N/A N/A N/A three month three month three month three month three month deposit, plus deposit, plus deposit, plus deposit, plus deposit, plus a Step-up a Step-up a Step-up a Step-up a Step-up Margin of Margin of Margin of Margin of Margin of 1.25 per cent per cent per cent per cent per cent. per annum per annum per annum per annum per annum Actual/360 Actual/360 Actual/360 Actual/360 Actual/360 N/A N/A N/A AAA (sf) / Aaa (sf) / AAA (sf) Notes Payment Date falling in January 2020 Notes Payment Date falling in January 2040 AA (sf) / Aa1 (sf) / AA (sf) Notes Payment Date falling in January 2020 Notes Payment Date falling in January 2040 A (sf) / Aa3 (sf) / A (sf) Notes Payment Date falling in January 2020 Notes Payment Date falling in January 2040 BBB (sf) / A3 (sf) / A- (sf) Notes Payment Date falling in January 2020 Notes Payment Date falling in January 2040 BB (low) (sf) / Ba2 (sf) / BBB- (sf) Notes Payment Date falling in January 2020 Notes Payment Date falling in January 2040 N/R N/R N/R Notes Payment Date falling in January 2020 Notes Payment Date falling in January 2040 N/A R2 Certificates N/A 1.) The interest rate payable on each respective class of Rated Notes (other than the Class A Notes) and each accrual period will be based on a per annum rate equal to the lesser of: a. the Euribor for three month deposits plus a certain Margin as described above; and b. the Net WAC Cap, which interest rate shall in each case be a minimum of 0.00 per cent. per annum. The interest rate payable on the Class A Notes will be based on a per annum rate equal to the Euribor for three month deposit s plus a certain Margin as described above, which interest rate shall in each case be a minimum of 0.00 per cent. per annum. 2.) As described in "1)" above, payments of interest on the Rated Notes are subject to the application of the Net WAC Cap on each Notes Payment Date. To the extent a class of Rated Notes becomes subject to the Net WAC Cap, the corresponding shortfall will be deferred and non-payment of such amounts shall not be deemed an Event of Default under any circumstances. Such deferred shortfall amounts may subsequently be payable through the application of Net WAC Additional Amounts. The Net WAC Additional Amounts may also be deferred and non-payment of such amounts shall not be deemed an Event of Default under any circumstances. Such Net WAC Additional Amounts are not rated. 3.) The First Optional Redemption Date is the Notes Payment Date falling in January ) The above ratings shall, among other things: a. to the holders of the Class A Notes, address the likelihood of full and timely payments of interest; b. to the holders of the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, address the likelihood of full and ultimate payment of interest (other than any Net WAC Additional Amounts) in relation to such Notes; and N/A N/A N/A 22

23 c. to the holders of the Rated Notes, address the likelihood of full and ultimate payment of principal in relation to such Notes. 5.) The Class Z Notes and the Certificates will not be rated by any Credit Rating Agency. 6.) Each R1 Certificate and R2 Certificate shall have a notional amount of EUR 100,000, as further set out in this Prospectus. Notes: The Notes shall be the following classes of notes of the Issuer, which are expected to be issued on or about the Closing Date: (iii) (iv) (v) (vi) the Class A Notes; the Class B Notes; the Class C Notes; the Class D Notes; the Class E Notes; and the Class Z Notes. Certificates: The Issuer will issue two separate classes of Certificates, being the R1 Certificates and the R2 Certificates, to the Lead Manager, on the Closing Date, except for the Retained Certificates, which the Issuer will issue to the Retention Holder on the Closing Date. The Certificates constitute part of the consideration provided by the Issuer and reflect the Issuer s obligation to pay deferred consideration and excess spread, as represented by any Certificate Payment due and payable to the relevant Certificateholder. The holders of the R1 Certificates will have the right to 100 per cent. of (and the holders of the R2 Certificates will have no right to) any Certificate Payment on any Notes Payment Date before the Class Z Notes have been redeemed in full (in accordance with the relevant Priority of Payments), and on and after the date of such redemption of the Class Z Notes in full, the holders of the R2 Certificates will have the right to 100 per cent. of (and the holders of the R1 Certificates will have no right to) any Certificate Payment. The Certificates will not be listed and not be rated. Issue Price: The issue price of the Notes will be as follows: (iii) (iv) (v) (vi) the Class A Notes, per cent.; the Class B Notes, per cent.; the Class C Notes, 100 per cent.; the Class D Notes, 100 per cent.; the Class E Notes, 100 per cent.; and the Class Z Notes, 100 per cent.. The Certificates will not have an issue price. 23

24 Form: The Notes are initially issued in bearer form and represented by Global Notes. In limited circumstances, the Notes will be issued in definitive form, serially numbered, and in respect of the Rated Notes, with coupons attached. The Certificates are initially issued in bearer form and represented by Global Certificates. In limited circumstances, the Certificates will be issued in definitive form, serially numbered. Denomination: Status and Ranking: The Notes and Certificates will be issued in denominations of EUR 100,000 and, in relation to the Notes, in integral multiples of EUR 1,000 in excess of such denomination. The Notes and Certificates of each Class rank pari passu without any preference or priority among Notes and Certificates, as applicable, of the same Class. The Class A Notes will rank pari passu without preference or priority among themselves in relation to payment of interest and principal at all times, as provided in the Conditions and the Transaction Documents. The Class B Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class B Net WAC Additional Amount (if any) at all times, but subordinate to the Class A Notes, as provided in the Conditions and the Transaction Documents (except that all payments in respect of any Class B Net WAC Additional Amount will rank subordinate to all payments due under the Notes other than all payments in respect of any Class C Net WAC Additional Amount, any Class D Net WAC Additional Amount, any Class E Net WAC Additional Amount and any principal amounts due under the Class Z Notes). The Class C Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class C Net WAC Additional Amount (if any) at all times, but subordinate to the Class A Notes and the Class B Notes, as provided in the Conditions and the Transaction Documents (except that all payments in respect of any Class C Net WAC Additional Amount will rank subordinate to all payments due under the Notes other than all payments in respect of any Class D Net WAC Additional Amount, any Class E Net WAC Additional Amount and in any principal amounts due under the Class Z Notes). The Class D Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class D Net WAC Additional Amount (if any) at all times, but subordinate to the Class A Notes, the Class B Notes and the Class C Notes, as provided in the Conditions and the Transaction Documents (except that all payments in respect of any Class D Net WAC Additional Amount will rank subordinate to all payments due under the Notes other than all payments in respect of any Class E Net WAC Additional Amount and any principal amounts due under the Class Z Notes). The Class E Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class E Net WAC Additional Amount (if any) at all times, but subordinate to the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes, as provided in the Conditions and the Transaction Documents (except that all payments in respect of any Class E Net WAC Additional Amount will rank subordinate to all payments due under the Notes 24

25 other than any principal amounts due under the Class Z Notes). The Class Z Notes will rank pari passu without preference or priority among themselves in relation to payment of principal at all times, but subordinated to the Rated Notes and any Net WAC Additional Amount, as provided in the Conditions and the Transaction Documents. The Class Z Notes do not pay interest. There is no assurance that the subordination provisions summarised above will protect the holders of the Notes from all the risks of losses on the Notes. The R1 Certificates and the R2 Certificates will rank pari passu without preference or priority among themselves, but subordinate to the Notes and any Net WAC Additional Amount, as provided in the Conditions and the Transaction Documents. The holders of the R1 Certificates will have the right to 100 per cent. of (and the holders of the R2 Certificates will have no right to) any Certificate Payment on any Notes Payment Date before the Class Z Notes have been redeemed in full (in accordance with the relevant Priority of Payments), and on and after the date of such redemption of the Class Z Notes in full, the holders of the R2 Certificates will have the right to 100 per cent. of (and the holders of the R1 Certificates will have no right to) any Certificate Payment. See further Sections 4.1 (Terms and Conditions of the Notes) and 4.2 (Terms and Conditions of the Certificates). Interest: Interest on each class of Rated Notes is payable by reference to the successive Interest Periods. The interest on each class of Rated Notes will be calculated on the basis of the actual days elapsed in the Interest Period divided by 360 days and will be payable quarterly in arrears on each Notes Payment Date, and will be calculated in respect of the Principal Amount Outstanding on the first day of the relevant Interest Period. Up to the First Optional Redemption Date, interest on each class of Rated Notes for each Interest Period will accrue at an annual rate equal to the sum of the Euribor for three month deposits in EUR (or, in respect of the first Interest Period, the rate which represents the linear interpolation of Euribor for three month deposits in EUR and Euribor for four month deposits in EUR, rounded, if necessary, to the 5th decimal place with , being rounded upwards), plus an Initial Margin of: (iii) (iv) (v) for the Class A Notes, 0.75 per cent. per annum; for the Class B Notes, 1.50 per cent. per annum; for the Class C Notes, 2.10 per cent. per annum; for the Class D Notes, 2.75 per cent. per annum; and for the Class E Notes, 3.75 per cent. per annum, which interest rate shall in each case be a minimum of 0.00 per cent. per annum. No interest will be payable in respect of the Class Z Notes and the Certificates. If on the First Optional Redemption Date the Notes will not have been redeemed in full, the rate of interest applicable to each class of Rated Notes will accrue at an annual 25

26 rate equal to the sum of Euribor for three month deposits in EUR (rounded, if necessary, to the 5th decimal place with , being rounded upwards), plus a Step-up Margin of: (iii) (iv) (v) for the Class A Notes, 1.25 per cent. per annum; for the Class B Notes, 2.50 per cent. per annum; for the Class C Notes, 3.10 per cent. per annum; for the Class D Notes, 3.75 per cent. per annum; and for the Class E Notes, 4.75 per cent. per annum, Net Additional Amounts: WAC which interest rate shall in each case be a minimum of 0.00 per cent. per annum. On each Notes Payment Date the Issuer shall, in accordance with the applicable Priority of Payments, pay any Net WAC Additional Amounts that are due and payable on such Notes Payment Date. Interest Deferral: Interest due and payable on the Class A Notes may not be deferred. Interest due and payable on the Rated Notes (other than the Class A Notes) may be deferred in accordance with Condition 5(f) (Subordination by Deferral). In accordance with Condition 5(f) (Subordination by Deferral), the Issuer may also defer payment of any Net WAC Additional Amounts (calculated as set out in Condition 5 (Interest)). Deferred Interest on the Rated Notes (other than the Class A Notes) shall accrue additional interest at the per annum rate equal to the lesser of the Euribor for three month deposits plus the relevant Margin and the Net WAC Cap, and shall become payable on the next Notes Payment Date (unless and to the extent that Condition 5(f) (Subordination by Deferral) again applies) or on such earlier date as the relevant Class of Rated Notes becomes due and repayable in full in accordance with the Conditions. Payments in respect of Certificates: Payments in respect of the Certificates will only be made to the extent that the Issuer has sufficient amounts available for that purpose in accordance with the applicable Priority of Payments, and will not be subject to deferral. There is no assurance that sufficient funds will be available to make any payments under the Certificates. Mandatory redemption on the Final Maturity Date: Mandatory redemption of the Notes: If and to the extent not already redeemed, the Issuer will redeem the Notes at their respective Principal Amount Outstanding on the Final Maturity Date, subject to and in accordance with Condition 3 (Status, Priority and Security), Condition 7 (Redemption) and Condition 10 (Limited recourse). Unless previously redeemed in full and provided that no Enforcement Notice has been served in accordance with Condition 11 (Event of Default), the Issuer will apply any Available Principal Funds, on the terms and subject to the conditions of the Redemption Priority of Payments, to redeem the Notes (in part), on each Notes Payment Date at their respective Principal Amount Outstanding, on a pro rata and pari passu basis within each Class, subject to Condition 10 (Limited recourse), in the 26

27 following sequential order: (iii) (iv) (v) (vi) first, the Class A Notes until fully redeemed; second, the Class B Notes until fully redeemed; third, the Class C Notes until fully redeemed; fourth, the Class D Notes until fully redeemed; fifth, the Class E Notes until fully redeemed; and sixth, the Class Z Notes. Mandatory redemption of the Notes under an Issuer Sale Process: Optional redemption for tax reasons: Retention and disclosure requirements under the EU Risk Retention Requirements and the U.S. Risk Unless already then redeemed in full, if the Issuer under an Issuer Sale Process has received a Binding Offer from a Committed Bidder and has completed such Issuer Sale Process relating to such offer on the terms and subject to the conditions of the Trust Deed, the Issuer will redeem the Notes (but not some only) on the relevant Notes Payment Date. Such Notes will be redeemed at their respective Principal Amount Outstanding plus accrued and unpaid interest up to (and including) the date of redemption (including any Net WAC Additional Amount) and all other amounts required to be paid in priority to or pari passu with the Notes on such date, in accordance with the Post-Enforcement Priority of Payments, subject to and in accordance with Condition 3 (Status, Priority and Security), Condition 7 (Redemption) and Condition 10 (Limited recourse). If the Issuer is or will be obliged to make any withholding or deduction for, or on account of, any taxes, duties or charges of whatsoever nature from payments in respect of any Class of Notes as a result of any change in, or amendment to, the laws or regulations of the Netherlands (including any guidelines issued by the tax authorities) or any other jurisdiction or any political sub-division or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations (including a holding by a court of competent jurisdiction), which becomes effective on or after the Closing Date and such obligation cannot be avoided by the Issuer taking reasonable measures available to it and provided that the Issuer will have sufficient funds available on the Notes Calculation Date immediately preceding the relevant Notes Payment Date to discharge all amounts of principal and interest due under the Notes and any amounts required to be paid in priority or pari passu with each Class of Notes in accordance with the Trust Deed, the Issuer has the option to redeem all (but not some only) of the Notes on any Notes Payment Date at their Principal Amount Outstanding plus accrued and unpaid interest up to (and including) the date of redemption (including any Net WAC Additional Amount) and all other amounts required to be paid in priority to or pari passu with the Notes on such date in accordance with the Post-Enforcement Priority of Payments, subject to and in accordance with Condition 3 (Status, Priority and Security), Condition 7 (Optional redemption for tax reasons) and Condition 10 (Limited recourse). EU Risk Retention Requirements In respect of the issue of the Notes, the Retention Holder, in its capacity as the originator within the meaning of Article 405 CRR, has separately undertaken to the Issuer, the Security Trustee, the Arranger and the Lead Manager that, for as long as the Notes are outstanding and on an ongoing basis, it will at all times retain an interest that qualifies as a material net economic interest in the securitisation transaction which, in 27

28 Retention Requirements: any event, shall not be less than 5 per cent., in accordance with Article 405 of the CRR, Article 51 of the AIFMR and Article 254 of the Solvency II Regulation by holding no less than 5 per cent of the nominal value of each Class of Notes sold or transferred to investors. The Retention Holder has separately undertaken to the Issuer, the Security Trustee, the Arranger and the Lead Manager that it will comply with the requirements set forth in Article 52(a) up to (and including) (d) of the AIFMR, Articles 408 and 409 of the CRR and (iii) Articles 254 and 256 paragraph 3 sub (a) up to (and including) sub (c) and sub (e) of the Solvency II Regulation. In addition to the information set out in and forming part of this Prospectus, the Retention Holder has undertaken to make materially relevant information available to investors with a view to such investor complying with Article 405 up to (and including) 409 of the CRR, Article 51, 52 and 53 of the AIFMR and Articles 254 and 256 of the Solvency II Regulation, which information can be obtained from the Retention Holder upon request. Each prospective Noteholder should ensure that it complies with the CRR, the AIFMR and the Solvency II Regulation to the extent such rules apply to it. U.S. Risk Retention Requirements In respect of the issue of the Notes and Certificates, the Retention Holder in its capacity as the sponsor within the meaning of the U.S. Risk Retention Requirements is subject to the requirement thereunder that the Retention Holder (or a majorityowned affiliate within the meaning given to such term by the U.S. Risk Retention Requirements) must retain, during the Risk Retention Period (as defined in this Prospectus), a 5 per cent. risk retention interest, which the Retention Holder intends to satisfy by retaining an eligible vertical interest in each Class of Notes and Certificates issued by the Issuer in the required amount of not less than 5 per cent. of the nominal amount of each such Class of Notes and such Certificates. The Retention Holder has separately undertaken to the Issuer, the Security Trustee, the Arranger and the Lead Manager that it will make available to the Issuer and the Security Trustee such information as required to be disclosed to holders of the Notes and the Certificates under the U.S. Risk Retention Requirements, and the Issuer will, following receipt of such information, make a copy of such information available to the holders of the Notes and the Certificates. See further Section 4.5 (Regulatory and Industry Compliance). Use of proceeds: The Issuer will apply the net proceeds from the issue of the Notes and Certificates towards: (iii) the payment of the Purchase Price for the Mortgage Receivables purchased by the Issuer pursuant to the provisions of the Mortgage Receivables Purchase Agreement; the funding of the Reserve Fund; and the payment of certain expenses related to the establishment of the transaction described in this Prospectus and effected under the Transaction Documents. Any surplus amounts will be applied as Available Principal Funds on the first Notes Payment Date. See further Section 7.1 (Purchase, Repurchase and Sale). 28

29 Withholding Tax: FATCA Withholding: Method of Payment: Security for the Notes and Certificates: All payments of, or in respect of, principal and interest on the Notes and Certificates will be made without withholding of, or deduction for, or on account of any present or future taxes, duties, assessments or charges of whatsoever nature imposed or levied by or on behalf of the Netherlands, any authority therein or thereof having power to tax unless the withholding or deduction of such taxes, duties, assessments or charges is required by law. In that event, the Issuer will make the required withholding or deduction of such taxes, duties, assessments or charges for the account of any of the Noteholders and Certificateholders, as the case may be, and shall not pay any additional amounts to such Noteholders and Certificateholders. If an amount in respect of FATCA Withholding were to be deducted or withheld either from amounts due to the Issuer or from interest, principal or other payments made in respect of any of the Notes and Certificates, neither the Issuer nor any paying agent nor any other person would, pursuant to the conditions of the Notes and Certificates, be required to pay additional amounts as a result of the deduction or withholding. For so long as the Notes and Certificates are represented by a Global Note and a Global Certificate, respectively, payments of any principal and, to the extent applicable, interest on the Notes and any Certificate Payment will be made in euros to Euroclear or Clearstream, Luxembourg for the credit of the respective accounts of the Noteholders and Certificateholders, respectively. The Notes and Certificates have the indirect benefit of: a first ranking undisclosed right of pledge by the Issuer to the Security Trustee over (a) the Mortgage Receivables, including all rights ancillary to such Mortgage Receivables and (b) the Beneficiary Rights; (iii) (iv) a first ranking disclosed right of pledge by the Issuer to the Security Trustee over the Issuer Rights including all rights ancillary to such Issuer Rights; a first ranking disclosed right of pledge by the Issuer to the Security Trustee in respect of its rights under the Issuer Accounts against the Issuer Account Bank; and a first ranking disclosed right of repledge (herpandrecht) by the Issuer in respect of the Collection Foundation s rights over the Collection Foundation Account in favour of, among others, the Security Trustee, and, by operation of the right of repledge in favour of the Security Trustee, a second ranking disclosed right of pledge by the Collection Foundation in respect of its rights over the Collection Foundation Account in favour of, among others, the Issuer. The Collection Foundation Account Pledge Agreement provides that future issuers (and any security trustees) in securitisation transactions and future vehicles in conduit transactions or similar transactions (and any security trustees relating thereto) initiated by any of the beneficiaries under the Collection Foundation Account Pledge Agreement will also have the benefit of such right of pledge. Such rights of pledge are governed by Dutch law and have been notified to the Collection Foundation Account Bank. As of the Closing Date, the Collection Foundation is used for several transactions initiated by the Originator or entities 29

30 related to the Originator. After the delivery of an Enforcement Notice, the amounts payable to the Noteholders, Certificateholders and the other Secured Creditors will be limited to the amounts available for such purpose to the Security Trustee which, among other things, will consist of amounts recovered by the Security Trustee in respect of such rights of pledge and amounts received by the Security Trustee as creditor under the Parallel Debt Agreement. Payments to the Secured Creditors will be made in accordance with the Post-Enforcement Priority of Payments. See further Section 4.9 (Security) and Section 5 (Credit Structure). Receivables Proceeds Distribution Agreement: Parallel Debt Agreement: Paying Agency Agreement: Listing: Credit ratings: On the Signing Date, the Issuer will enter into the Receivables Proceeds Distribution Agreement under which, among other things, the Collection Foundation undertakes to transfer all amounts received on the Collection Foundation Account in respect of the Mortgage Receivables, to the Issuer Collection Account. On the Signing Date, the Issuer and the Security Trustee will, among others, enter into the Parallel Debt Agreement for the benefit of the Secured Creditors under which the Issuer shall, by way of parallel debt, undertake to pay to the Security Trustee amounts equal to the amounts due by it to the Secured Creditors, in order to create a claim of the Security Trustee against the Issuer for such amounts and which can be validly secured by the rights of pledge created by the Pledge Agreements. On the Signing Date, the Issuer will enter into the Paying Agency Agreement with the Paying Agent and the Reference Agent under which the Paying Agent will, among other things, perform certain payment services on behalf of the Issuer for the benefit of the Noteholders and Certificateholders. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on its regulated market. It is a condition precedent to the issue of the Notes that: (iii) (iv) (v) the Class A Notes, on issue, be assigned an AAA (sf) credit rating by DBRS, an Aaa (sf) credit rating by Moody s and an AAA (sf) credit rating by S&P; the Class B Notes, on issue, be assigned an AA (sf) credit rating by DBRS, an Aa1 (sf) credit rating by Moody s and an AA (sf) credit rating by S&P; the Class C Notes, on issue, be assigned an A (sf) credit rating by DBRS, an Aa3 credit rating by Moody s and an A (sf) credit rating by S&P; the Class D Notes, on issue, be assigned a BBB (sf) credit rating by DBRS, an A3 credit rating by Moody s and an A- (sf) credit rating by S&P; and the Class E Notes, on issue, be assigned a BB (low) (sf) credit rating by DBRS, a Ba2 credit rating by Moody s and a BBB- (sf) credit rating by S&P. Each of the Credit Rating Agencies is established in the European Union and is registered under Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on Credit Rating Agencies. The Class Z Notes, the Certificates and any payments of Net WAC Additional Amounts in respect of the Rated Notes (other than the Class A Notes) will not be 30

31 assigned a credit rating. Settlement: Governing Law: Selling Restrictions: Euroclear or Clearstream, Luxembourg The Notes, Certificates and the Transaction Documents will be governed by and construed in accordance with Dutch law. There are selling restrictions in relation to the EEA, France, Italy, the Netherlands, the United Kingdom and the United States and such other restrictions as may be required in connection with the offering and sale of the Notes. See further Section 4.4 (Subscription and sale). 31

32 1.5 Credit Structure Available Funds: Priority of Payments: The Issuer will use receipts of principal and interest in respect of the Mortgage Receivables together with drawings from the Reserve Fund and the Issuer Collection Account, to make payments of, among other things, principal and interest due under the Notes and payments due under the Certificates. The obligations of the Issuer under the Notes will rank subordinate to the obligations of the Issuer in respect of certain payment obligations specified in the applicable Priority of Payments. The obligations of the Issuer under the Certificates will rank subordinate to the obligations of the Issuer in respect of the Notes and certain other payment obligations specified in the applicable Priority of Payments. See further Sections 4.1 (Terms and Conditions of the Notes), 4.2 (Terms and Conditions of the Certificates) and 5 (Credit Structure). Issuer Accounts: The Issuer will establish and maintain with the Issuer Account Bank the following accounts: Issuer Collection Account: an account to which on each Mortgage Collection Payment Date and at least on a weekly basis after that (or at such other times as the Issuer Administrator and the Issuer may agree from time to time), all amounts received during the immediately preceding Mortgage Calculation Period in respect of the Mortgage Receivables into the Collection Foundation Account will be transferred by the Servicer and / or the Collection Foundation, in accordance with the Servicing Agreement and the Receivables Proceeds Distribution Agreement; and Reserve Fund Account: an account to which on the Closing Date from the proceeds of the issue of the Notes an amount will be credited to the Reserve Fund Account up to the Reserve Fund Required Amount, and further, on each Notes Payment Date certain amounts to the extent available in accordance with the Revenue Priority of Payments, will be transferred by the Issuer Administrator into the Reserve Fund Account up to the Reserve Fund Required Amount. Issuer Account Agreement: Administration Agreement: On the Signing Date, the Issuer will enter into the Issuer Account Agreement with the Issuer Account Bank, under which the Issuer Account Bank agrees to pay a guaranteed interest rate (or in the event that such interest rate is less than zero, receive a guaranteed interest rate from the Issuer), determined by reference to EONIA or Euribor minus a margin, on the balance standing to the credit of each of the Issuer Accounts from time to time. See further Section 5 (Credit Structure). On the Signing Date, the Issuer will enter into the Administration Agreement between the Issuer, the Issuer Administrator and the Security Trustee, under which the Issuer Administrator will agree to provide certain administration, calculation and cash management services for the Issuer on a day-to-day basis, including, all calculations to be made in respect of the Notes and Certificates pursuant to the Conditions and Certificates Conditions and to submit certain statistical information regarding the Issuer to certain governmental authorities if and when requested. 32

33 Collection Foundation: Payments by the Borrowers of interest and principal under the Mortgage Loans are required to be paid into the Collection Foundation Account maintained by the Collection Foundation with the Collection Foundation Account Bank. The Collection Foundation Account is also used for the collection of moneys paid in respect of mortgage loans other than the Mortgage Loans and in respect of other moneys to which the Originator or any entity that has acquired mortgage loans from the Originator is entitled from the Collection Foundation. For more information see Cash Collection Arrangements in Section 5.1 (Available Funds). Collection Foundation Account: Collection Foundation Account Pledge Agreement: All payments made by the Borrowers in respect of the Mortgage Loans will be paid into the Collection Foundation Account. Under the Collection Foundation Account Pledge Agreement the Issuer, among others, will grant a first ranking disclosed right of repledge (herpandrecht) in respect of the Collection Foundation s rights over the Collection Foundation Account in favour of, among others, the Security Trustee, and, by operation of the right of repledge in favour of the Security Trustee, a second ranking disclosed right of pledge by the Collection Foundation in respect of its rights over the Collection Foundation Account in favour of, among others, the Issuer. The Collection Foundation Account Pledge Agreement provides that future issuers (and any security trustees) in securitisation transactions and future vehicles in conduit transactions or similar transactions (and any security trustees relating thereto) initiated by any of the beneficiaries under the Collection Foundation Account Pledge Agreement will also have the benefit of such rights of pledge. Such rights of pledge are governed by Dutch law and have been notified to the Collection Foundation Account Bank and the Collection Foundation, respectively. As of the Closing Date, the Collection Foundation is used for several transactions initiated by the Originator or entities related to the Originator. 33

34 1.6 Portfolio Information The numerical information set out below relates to the provisional pool which was selected on 31 October 2016 (the Provisional Pool), as at such date (the Provisional Pool Date). Therefore, the information set out below in relation to the Provisional Pool may not necessarily correspond to the details of the Mortgage Receivables actually sold and assigned on the Closing Date. Furthermore, after the Closing Date, the portfolio will change from time to time as a result of repayment, prepayment and amendment of the Mortgage Receivables. The Mortgage Loans in the final pool will be selected on or before the Closing Date from the Provisional Pool of Mortgage Loans that has been selected in accordance with the criteria in the Mortgage Receivables Purchase Agreement (the Final Pool). The Final Pool will have the same general characteristics as the Provisional Pool. However, there can be no assurance that on the date of purchase by the Issuer, the characteristics of the Final Pool will correspond with the exact same characteristics in the Provisional Pool. Key Characteristics As per reporting date Principal amount 157,725, Number of loans 820 Number of loanparts 874 Number of negative loanparts 0 Average principal balance (borrower) 192,348 Weighted average current interest rate 3.02% Weighted average maturity (in years) Weighted average remaining time to interest reset (in years) 0.09 Weighted average seasoning (in years) 9.04 Weighted average CLTOMV 97.66% Weighted average CLTIMV % Weighted average OLTOMV Loans greater than 1 month in arrears 98.32% 10.66% Mortgage Loans: The Mortgage Receivables arise from Mortgage Loans originated by the Originator. Life Loans: Mortgage The pool of Mortgage Loans (or any Loan Parts (leningdelen) comprising a Mortgage Loan) will consist of Life Mortgage Loans (levenhypotheken), Linear Mortgage Loans (lineaire hypotheken), Annuity Mortgage Loans (annuïteiten hypotheken) and Interestonly Mortgage Loans (aflossingsvrije hypotheken), or combinations of these types of loans. All Mortgage Loans are secured by a first ranking or first and sequentially lower ranking mortgage right and were vested for a principal sum which is at least equal to the principal sum of the Mortgage Loan when originated, increased with interest, penalties, costs and any insurance premium. Mortgage Loans may consist of one or more Loan Parts. If a Mortgage Loan consists of one or more Loan Parts, the Seller shall sell and assign and the Issuer shall purchase and accept the assignment of all, but not some, Loan Parts of such Mortgage Loan at the Closing Date (or at the relevant Notes Payment Date as the case may be). See further Section 6.2 (Description of Mortgage Loans). The Mortgage Loans have characteristics that demonstrate the capacity to produce funds to service any payments due and payable under the Notes. A portion of the Mortgage Loans (or parts of them) will be in the form of Life Mortgage Loans. Life Mortgage Loans are mortgage loans which are connected to a 34

35 combined risk and capital insurance policy taken out by the Borrower under which the Borrower builds up capital which it can use to redeem the mortgage loan at maturity. Instead of principal payments, the Borrower pays to the relevant Insurance Company a premium, either on an instalment basis or up front. The premium consists of a risk insurance element and a capital insurance element. The risk insurance element of the premium is paid under the policy, in exchange for the undertaking of the Insurance Company to pay out an agreed amount upon the death of the insured, which may not always be the Borrower. The capital insurance element of the premium is used by the Insurance Company to build up capital. It is the intention, but not the obligation of the Borrower, that the capital is applied towards redemption of the principal amount at maturity thereof. The capital elements of the premiums paid by the Borrowers are invested by the Insurance Company in certain funds. Failure by the Borrower to pay the premium under the Life Insurance Policy would result in the Mortgage Receivable becoming due and payable (opeisbaar). See further Section 6.2 (Description of Mortgage Loans). Linear Mortgage Loans: Annuity Mortgage Loans: Interest-only Mortgage Loans: A portion of the Mortgage Loans (or parts of them) will be in the form of Linear Mortgage Loans. Under a Linear Mortgage Loan the Borrower redeems a fixed amount on each instalment, such that at maturity the entire loan will be redeemed. The Borrower s payment obligation decreases with each payment as interest owed under such Mortgage Loan declines over time. A portion of the Mortgage Loans (or parts of them) will be in the form of Annuity Mortgage Loans. Under an Annuity Mortgage Loan the Borrower pays a constant total monthly payment, made up of an initially high and subsequently decreasing interest portion and an initially low and subsequently increasing principal portion, and calculated in such a manner that such Mortgage Loan will be fully redeemed at the end of its term. A portion of the Mortgage Loans (or parts of them) will be in the form of Interest-only Mortgage Loans. Under an Interest-only Mortgage Loan, the Borrower is not obliged to pay principal towards redemption of the relevant Mortgage Loan (or relevant part of it) until maturity. Interest is payable monthly and is calculated on the principal balance of the Mortgage Loan (or relevant part of it). 35

36 1.7 Portfolio Documentation Mortgage Receivables Purchase Agreement and purchase of Mortgage Receivables: Under the Mortgage Receivables Purchase Agreement, on the Signing Date, the Issuer will agree to purchase and, on the Closing Date, accept the assignment of, the Mortgage Receivables of the Seller, together with, to the extent legally possible, the Beneficiary Rights relating to the Mortgage Receivables, under or in connection with the Mortgage Loans. See further Section 7 (Portfolio Documentation). The Originator has the benefit of Beneficiary Rights which entitle the Originator to receive the final payment under the relevant Insurance Policies, which payment is to be applied towards redemption of the Mortgage Receivables. To the extent the Seller has acquired these Beneficiary Rights pursuant to Assignment 2, the Seller will sell and assign such Beneficiary Rights to the Issuer and the Issuer will accept such assignment under the Mortgage Receivables Purchase Agreement. Limited indemnity for breach of representations and warranties: No repurchase obligation: Mortgage Portfolio Purchase Option: Under the Mortgage Receivables Purchase Agreement, the Seller will undertake to indemnify the Issuer in an amount not more than EUR 20,000 under each Mortgage Receivable, irrespective of the number of (or severity of) breaches of representations and warranties under and in respect of such Mortgage Receivable (and related Mortgage Loan), for any amount not received by the Issuer as a result of the representations and warranties given by the Seller in respect of such Mortgage Receivable (and the related Mortgage Loan) (including, the representation and warranty that the Mortgage Loan or, as the case may be, the relevant Mortgage Receivable meets the Mortgage Loan Criteria), is untrue or incorrect in any material respect. The Seller will be under no obligation to repurchase and accept reassignment of any Mortgage Receivable (and the Beneficiary Rights relating to such Mortgage Receivable) under any circumstance, including, if any of the representations and warranties given by the Seller in respect of the Mortgage Loans and the Mortgage Receivables, are untrue or incorrect in any respect. The Mortgage Portfolio Option Holder has an option (but not an obligation) to require the Issuer to: sell and assign to the Mortgage Portfolio Option Holder (or its nominee) the Mortgage Portfolio; and serve all relevant notices and take all steps (including carrying out requisite registrations and recordings) in order to vest or transfer the Mortgage Portfolio to the Mortgage Portfolio Option Holder (or its nominee), in each case, subject to the terms of the Certificate Conditions and the Trust Deed. The Mortgage Portfolio Purchase Option may be exercised on the First Optional Redemption Date and on the Issuer Sale Trigger Date, by notice to the Issuer (with a copy to the Security Trustee, the Seller, the Liquidation Agent and the Credit Rating Agencies), and if the Mortgage Portfolio Purchase Option is not exercised on any such date, it will expire. See further Section 7.4 (Mortgage Portfolio Purchase Option). 36

37 Mortgage Portfolio Purchase Price: The purchase price for the Mortgage Portfolio under the Mortgage Portfolio Purchase Option will be an amount equal to: the aggregate Principal Amount Outstanding of the Notes plus accrued and unpaid interest (including any Net WAC Additional Amount) calculated as of the Portfolio Purchase Completion Date; plus (iii) any fees, costs, amounts and expenses of the Issuer and the Security Trustee payable senior to any amounts payable to the holders of the Certificates in the Post-Enforcement Priority of Payments; less any amounts standing to the credit of the Reserve Fund Account calculated as of the Portfolio Purchase Completion Date. Mortgage Portfolio Purchase Option application of sale proceeds The proceeds of the sale and assignment of the Mortgage Portfolio to the Mortgage Portfolio Option Holder will be applied to redeem the Notes under Condition 7(f) (Mandatory redemption under the Mortgage Portfolio Purchase Option or a Market Sale Process), in accordance with the Post-Enforcement Priority of Payments (regardless of whether an Enforcement Notice has or has not been delivered at that time) on the next following Notes Payment Date, subject to and accordance with Condition 3 (Status, Priority and Security), Condition 7 (Redemption) and Condition 10 (Limited recourse). Any funds remaining after the payment in full of all items ranking above item (m) of the Post-Enforcement Priority of Payments will be paid to the holders of the relevant Certificates. See further Section 7.5 (Mortgage Portfolio Purchase Price). Mortgage Portfolio Option Holder: The Mortgage Portfolio Option Holder will be: where the R1 Certificates and R2 Certificates are represented by Definitive Certificates, the holder of more than (x) 50 per cent. of the R1 Certificates and (y) 50 per cent. of the R2 Certificates, or where the R1 Certificates and R2 Certificates are represented by Global Certificates, any indirect participant who holds the beneficial interest in more than (x) 50 per cent. of the R1 Certificates and (y) 50 per cent. of the R2 Certificates; or where no person holds more than 50 per cent. of the R1 Certificates and 50 per cent. of the R2 Certificates, or beneficial interest in more than 50 per cent. of the R1 Certificates and 50 per cent. of the R2 Certificates, as applicable, the person who holds the most number of (x) each of the R1 Certificates and (y) the R2 Certificates, or beneficial interest in the most number of (x) each of the R1 Certificates and (y) the R2 Certificates. Mortgage Portfolio Option Holder rights: In addition to the Mortgage Portfolio Purchase Option, the Mortgage Portfolio Option Holder will have the right to: participate in an Issuer Sale Process to purchase the Mortgage Portfolio if it submits a Binding Offer to purchase the Mortgage Portfolio before a Market Sale Process has started, for a purchase price not less than the Issuer Sale Purchase Price Floor; and purchase the Mortgage Portfolio if it submits a Counter-Bid to purchase the Mortgage Portfolio for a purchase price which is higher than the purchase price 37

38 which a Seller Entity offered to the Issuer, as more particularly set out below. Issuer Sale Process: If the Mortgage Portfolio Purchase Option is not exercised on the First Optional Redemption Date or on the first Issuer Sale Trigger Date, then within 3 Business Days after such Issuer Sale Trigger Date, the Issuer will invite Market Participants, through the publication of a notice on a regulatory news service, to submit a Binding Offer or Non-Binding Offer to the Issuer for the purchase of the Mortgage Portfolio from the Issuer, at a price not less than: in the case of receiving one or more Binding Offers from any Market Participant(s), the Issuer Sale Purchase Price Floor; or in the case of receiving one or more Non-Binding Offers from any Market Participant(s), the Market Sale Purchase Price Floor. If the Issuer does not receive any Binding Offer or Non-Binding Offer from any Market Participants, the Issuer will repeat the above procedure and publish a notice on each subsequent Notes Payment Date inviting Market Participants to submit offers, until the earlier of the date on which all the Notes are redeemed in full and the Final Maturity Date. There will be no limit to the number of times an Issuer Sale Process, an Issuer Sale Trigger Date, a Market Sale Process and a Market Sale Trigger Date may occur or be repeated, until the Mortgage Portfolio is sold and assigned by the Issuer to a Market Participant and the Notes are redeemed in full under either: Condition 7(h) (Mandatory redemption under an Issuer Sale Process) following the sale and assignment of the Mortgage Portfolio under an Issuer Sale Process; and Condition 7(f) (Mandatory redemption under the Mortgage Portfolio Purchase Option or a Market Sale Process) following the sale and assignment of the Mortgage Portfolio under a Market Sale Process. See further Section 7.6 (Issuer Sale Process). Receipt of Binding Offer: Market Sale Process upon receipt of Non- Binding Offer(s): If during an Issuer Sale Process, the Issuer receives a Binding Offer from a Committed Bidder, then the Issuer will sell and assign the Mortgage Portfolio to such Committed Bidder on the relevant Notes Payment Date, and the Notes will be redeemed by the Issuer under such Issuer Sale Process. If during an Issuer Sale Process, the Issuer receives at least one Non-Binding Offer from any Market Participant, then the Security Trustee will instruct the Liquidation Agent to start a Market Sale Process as of the relevant Market Sale Trigger Date and following such date, the ability of the Issuer to undertake the Issuer Sale Process will be suspended and the Issuer Sale Process will only resume again, if the Market Sale Process (that followed such suspended Issuer Sale Process), is suspended in accordance with the provisions set out below. If during a Market Sale Process, the Liquidation Agent does not receive at least two additional offers to purchase the Mortgage Portfolio from any Market Participants for a price not less than the Market Sale Purchase Price Floor, such Market Sale Process will be suspended. 38

39 Portfolio Manager and auction process: If the Liquidation Agent receives at least two additional offers to purchase the Mortgage Portfolio from Market Participants, the Liquidation Agent will appoint a Portfolio Manager to advise it in relation to the sale and assignment of the Mortgage Portfolio to such Market Participants under a Market Sale Process. The Portfolio Manager will conduct a market auction (under which all relevant Market Participants will be required to submit Binding Offers) in relation to the purchase of the Mortgage Portfolio for a price not less than the Market Sale Purchase Price Floor. See further Section 7.7 (Market Sale Process). Market Sale Purchase Price Floor: The Market Sale Purchase Price Floor will be an amount equal to: the aggregate Principal Amount Outstanding of the Notes plus accrued and unpaid interest (including any Net WAC Additional Amount) calculated as of the Market Sale Completion Date; plus (iii) any fees, costs, amounts and expenses of the Issuer and the Security Trustee payable senior to any amounts payable to the holders of the Certificates in the Post-Enforcement Priority of Payments, including, any fees, costs, amounts and expenses incurred (including, the Liquidation Agent, any Success Fee and Sounding Fee) as part of or related to any Market Sale Process; less any amounts standing to the credit of the Reserve Fund Account calculated as of the Market Sale Completion Date. Rights of Seller Entities: Counter-Bid: A Seller Entity will have the right to submit a Non-Binding Offer to purchase the Mortgage Portfolio under an Issuer Sale Process. A Seller Entity will not have the right to submit a Binding Offer to purchase the Mortgage Portfolio under any Issuer Sale Process, unless a Seller Entity had previously submitted a Non-Binding Offer to purchase the Mortgage Portfolio and the Liquidation Agent did not receive at least two other offers to purchase the Mortgage Portfolio from Market Participants for a price not less than the Market Sale Purchase Price Floor. In such case, the Issuer will sell and assign the Mortgage Portfolio to such Seller Entity (subject to any Counter- Bid) on the relevant Notes Payment Date, and the Notes will be redeemed by the Issuer under an Issuer Sale Process. If a Seller Entity: wins an auction for the Mortgage Portfolio under a Market Sale Process; or submits a Binding Offer to purchase the Mortgage Portfolio under an Issuer Sale Process, in accordance with the procedure set out above, the Mortgage Portfolio Option Holder will have the right, within 14 calendar days of the Bid Presentation Date (in the case of above) or the date of such Binding Offer (in the case of above), to submit a Counter-Bid to the Issuer, which, if higher than the price the Seller Entity offered to the Issuer, will require the Issuer to sell and assign the Mortgage Portfolio to the Mortgage Portfolio Option Holder, for such higher price. Market Sale Process - application of sale proceeds: The proceeds of the sale and assignment of the Mortgage Portfolio under a Market Sale Process will be applied to redeem the Notes under Condition 7(f) (Mandatory redemption under the Mortgage Portfolio Purchase Option or a Market Sale Process) in accordance with the Post-Enforcement Priority of Payments (regardless of whether an Enforcement Notice has or has not been delivered at that time) on the next following 39

40 Notes Payment Date, subject to and accordance with Condition 3 (Status, Priority and Security), Condition 7 (Redemption) and Condition 10 (Limited recourse). Any funds remaining after the payment in full of all items ranking above item (m) of the Post- Enforcement Priority of Payments will be paid to the holders of the relevant Certificates. Conflicts between Binding Offer and Non-Binding Offer: Liquidation Agent: Clean-up Call Option: If during any Issuer Sale Process (and before any Market Sale Process has started), the Issuer receives a Binding Offer and a Non-Binding Offer to purchase the Mortgage Portfolio, the Issuer will accept the Binding Offer for a purchase price not less than the Issuer Sale Purchase Price Floor and reject the Non-Binding Offer. Under the Trust Deed, the Issuer will agree to procure, on or before the First Optional Redemption Date, the appointment of a Liquidation Agent to provide certain services to the Issuer in relation to, among other things, seeking offers for the sale and assignment of the Mortgage Portfolio if the Mortgage Portfolio Purchase Option is not exercised. See further Section 7.8 (Liquidation Agent Agreement). If on any Notes Payment Date, the aggregate Principal Amount Outstanding of the Notes is not more than 10 per cent. of the aggregate Principal Amount Outstanding (including any Net WAC Additional Amounts) of the Notes on the Closing Date (and provided that the Mortgage Portfolio Option Holder has not provided a notice to the Issuer to exercise the Mortgage Portfolio Purchase Option), the Seller has the option (but not the obligation) to repurchase the Mortgage Receivables. See further Section 7.9 (Clean-up Call Option). If the Clean-up Call Option is exercised by the Seller, the Issuer has the obligation to sell and assign all (but not some only) of the Mortgage Receivables to the Seller or any third party appointed by the Seller at its sole discretion on or prior to the relevant Notes Payment Date. The Issuer shall apply the proceeds of such sale to fully redeem the Notes at their respective Principal Amount Outstanding, subject to and in accordance with Condition 3 (Status, Priority and Security), Condition 7 (Redemption) and Condition 10 (Limited recourse). Tax Call Option: Servicing Agreement: Under the Trust Deed, the Issuer has the right to sell all (but not some only) of the Mortgage Receivables to a third party if it exercises the Tax Call Option (in accordance with Condition 7 (Optional redemption for tax reasons)), provided that the Issuer shall apply the proceeds of such sale to redeem the Notes at their respective Principal Amount Outstanding plus accrued and unpaid interest up to (and including) the date of redemption (including any Net WAC Additional Amount) and all other amounts required to be paid in priority to or pari passu with the Notes on such date in accordance with the Post-Enforcement Priority of Payments (regardless of whether an Enforcement Notice has or has not been delivered at that time), subject to Condition 3 (Status, Priority and Security), Condition 7 (Redemption) and Condition 10 (Limited recourse). Under the Servicing Agreement, the Servicer will agree to provide mortgage loan collection and payment transaction services as agreed in the Servicing Agreement in relation to the Mortgage Loans on a day-to-day basis, including, the collection of payments of any principal, interest and all other amounts in respect of the Mortgage Receivables and the Servicer will agree to implement arrears procedures, including, if applicable, the enforcement of mortgages. See further Section 7.15 (Servicing Agreement). 40

41 Interim Sub- MPT Servicing Agreement: Under the Interim Sub-MPT Servicing Agreement, the Servicer will appoint the Interim Sub-MPT Servicer (as the agent of the Servicer) to perform certain of the mortgage loan collection and payment transaction services (such services, the Interim Sub-MPT Services), required to be undertaken by the Servicer under the Servicing Agreement, until 31 December 2017 (or such other period agreed between the Interim Sub-MPT Servicer and the Servicer), and the Interim Sub-MPT Servicer will agree to provide such services on the terms and subject to the conditions of the Interim Sub- MPT Servicing Agreement. In addition, the Interim Sub-MPT Servicer will undertake to the Servicer to transfer the Interim Sub-MPT Services to the Servicer on or before 31 December 2017 (or such other period agreed between the Interim Sub-MPT Servicer and the Servicer), such that the Servicer will from the transfer undertake and perform the Interim Sub-MPT Services under the terms of the Servicing Agreement. See further Section 7.15 (Servicing Agreement). 41

42 1.8 General Management Agreements: Each of the Issuer, the Security Trustee and the Shareholder will enter into a Management Agreement with the relevant Director, under which the relevant Director will undertake to act as director of the Issuer, the Security Trustee or the Shareholder, respectively, and to perform certain management services. 42

43 2. RISK FACTORS The following is a description of the principal risks associated with an investment in any of the Notes and the Certificates. These risk factors are material to an investment in any of the Notes, the Certificates and in the Issuer. Prospective Noteholders and Certificateholders should carefully read and consider all the information contained in this Prospectus, including the risk factors set out in this section, prior to making any investment decision. An investment in any of the Notes and Certificates is only suitable for investors experienced in financial matters who are in a position to fully assess the risks relating to such an investment and who have sufficient financial means to suffer any potential loss stemming from such investment. The Issuer believes that the risks described below are the material risks inherent for Noteholders and Certificateholders, but the inability of the Issuer to pay interest, principal or other amounts on or in connection with any of the Notes and Certificates may occur for other reasons and the Issuer does not represent that the statements below regarding the risks relating to the Notes and Certificates are exhaustive. Additional risks or uncertainties not presently known to the Issuer or that the Issuer currently considers immaterial may also have an adverse effect on the Issuer s ability to pay interest, principal or other amounts in respect of any of the Notes and Certificates. Prospective Noteholders and Certificateholders should read the detailed information set out in this Prospectus and reach their own views, together with their own professional advisers, prior to making any investment decision. The purchase of any of the Notes and Certificates involves substantial risks and is suitable only for sophisticated investors who have the knowledge and experience in financial and business matters necessary to enable them to evaluate the risks and the merits of an investment in any of the Notes and Certificates. Before making an investment decision, prospective purchasers of any of the Notes and Certificates should ensure that they understand the nature of the Notes and Certificates and the extent of their exposure to risk, consider carefully, in the light of their own financial circumstances and investment objectives (and those of any accounts for which they are acting) and in consultation with such legal, financial, regulatory and tax advisers as it deems appropriate, all the information set out in this Prospectus so as to arrive at their own independent evaluation of the investment and (iii) confirm that an investment in the Notes and Certificates is fully consistent with their respective financial needs, objectives and any applicable investment restrictions and is suitable for them. The Notes and Certificates are not a conventional investment and carry various unique investment risks, which prospective investors should understand clearly before investing in them. In particular, an investment in any of the Notes and Certificates involves the risk of a partial or total loss of investment or return. RISK FACTORS REGARDING THE ISSUER The Notes and Certificates will be solely the obligations of the Issuer The Notes and Certificates will be solely the obligations of the Issuer. The Notes and Certificates will not be obligations or responsibilities of, or guaranteed by, any other entity or person, in whatever capacity acting, including, the Seller, the Originator, the Servicer, the Interim Sub-MPT Servicer, the Issuer Administrator, the Directors, the Paying Agent, the Reference Agent, the Lead Manager, the Issuer Account Bank, the Arranger, the Mortgage Portfolio Option Holder, the Collection Foundation, the Collection Foundation Account Bank, the Liquidation Agent, the Security Trustee, the Back-Up Issuer Administrator, the Back-Up Servicer Facilitator and any other transaction party, in whatever capacity acting. Furthermore, none of the Seller, the Originator, the Servicer, the Interim Sub-MPT Servicer, the Issuer Administrator, the Directors, the Paying Agent, the Reference Agent, the Lead Manager, the Issuer Account Bank, the Arranger, the Collection Foundation, the Collection Foundation Account Bank, the Liquidation Agent, the Security Trustee, the Back-Up Issuer Administrator, the Back-Up Servicer Facilitator and any other transaction party, nor any other person in whatever capacity acting, will accept any liability whatsoever to Noteholders or 43

44 Certificateholders in respect of any failure by the Issuer to pay any amounts due under any of the Notes or Certificates. None of the Seller, the Originator, the Servicer, the Interim Sub-MPT Servicer, the Issuer Administrator, the Directors, the Paying Agent, the Reference Agent, the Lead Manager, the Issuer Account Bank, the Arranger, the Collection Foundation, the Collection Foundation Account Bank, the Liquidation Agent, the Security Trustee, the Back-Up Issuer Administrator, the Back-Up Servicer Facilitator and any other transaction party will be under any obligation whatsoever to provide additional funds to the Issuer (save in the limited circumstances pursuant to the Transaction Documents). The Issuer has limited resources available to meet its obligations The ability of the Issuer to meet its obligations in full to pay principal of and interest, if any, on the Notes and payments due under the Certificates, if any, will be dependent solely on the receipt by it of funds under the Mortgage Portfolio, the proceeds of the sale of any Mortgage Receivables, (iii) drawings under the Reserve Fund and (iv) the receipt by it of interest earned in respect of the balance standing to the credit of the Issuer Accounts and income from any Eligible Investments. The Issuer does not have any other resources available to it to meet its obligations under any of the Notes and Certificates. See further Section 5 (Credit Structure) below. With respect to the Reserve Fund, Noteholders should be aware that an amount will be credited to the Reserve Fund Account on the Closing Date equal to EUR 3,116,400. The Issuer will transfer on each Notes Payment Date certain amounts to the extent available in accordance with the Revenue Priority of Payments up to the Reserve Fund Required Amount. As a consequence there is no guarantee that the Reserve Fund will be funded or will be funded up to the Reserve Fund Required Amount from time to time. Consequently, the Issuer may be unable to recover fully and / or on a timely basis have the funds necessary to fulfil its payment obligations under the Notes and Certificates. If such funds are insufficient, any such insufficiency will be borne by the Noteholders, Certificateholders and the other Secured Creditors, subject to the applicable Priority of Payments. Risk in relation to the Purchase Price of Mortgage Portfolio The Mortgage Portfolio will be acquired by the Issuer from the Seller under the Mortgage Receivables Purchase Agreement for the Purchase Price. The Purchase Price will comprise of the aggregate Outstanding Principal Amount of the Mortgage Receivables at the Cut-Off Date, plus an amount attributable to the deferred consideration and excess spread, as represented by any Certificate Payment due and payable to the relevant Certificateholder. The Mortgage Receivables are not assets that have readily observable prices, and the actual prices of them may vary from, and could vary materially from, the Purchase Price being paid by the Issuer to the Seller to acquire the Mortgage Receivables. The Issuer has counterparty risk exposure Counterparties to the Issuer may not perform their obligations under the Transaction Documents, which may result in the Issuer not being able to meet its obligations under any of the Notes and Certificates, including any payments due under any of the Notes and Certificates. Risk that the ratings of the counterparties change Certain counterparties of the Issuer are required to have a certain minimum rating pursuant to the Transaction Documents and if the rating of such counterparty falls below such rating, remedial actions are required to be taken, which may, for example, entail posting of collateral and / or replacement of such counterparty. If a replacement counterparty must be appointed or another remedial action must be taken, it is not certain whether a replacement counterparty can be found which complies with the criteria or is willing to 44

45 perform such role or such remedial action is available. In addition, such replacement or action when taken, may lead to higher costs and expenses, as a result of which the Issuer may have insufficient funds to pay its liabilities in full. Moreover, a deterioration of the credit quality of any of the Issuer s counterparties, a downgrade of their credit rating and / or the failure to take remedial actions could have an adverse effect on the credit rating assigned to, and / or the value of, any of the Notes and Certificates, as applicable. Effectiveness of the rights of pledge to the Security Trustee in case of insolvency of the Issuer Under or pursuant to the Pledge Agreements, various rights of pledge will be granted by the Issuer and / or the Collection Foundation to the Security Trustee and / or the Issuer, as applicable. On the basis of these pledges the Security Trustee and / or the Issuer can exercise the rights afforded by Dutch law to pledgees notwithstanding bankruptcy or suspension of payments of the Issuer or the Collection Foundation (as the case may be). The Issuer is a special purpose vehicle and is therefore unlikely to become insolvent. However, any bankruptcy or suspension of payments involving the Issuer or the Collection Foundation (as the case may be) would affect the position of the Security Trustee as pledgee in some respects, the most important of which are: payments made by the Borrowers to the Issuer after notification of the assignment to the Issuer, but prior to notification of the pledge to the Security Trustee, and after bankruptcy or suspension of payments of the Issuer will form part of the bankruptcy estate of the Issuer, although the Security Trustee has the right to recover such amounts by preference after deduction of certain costs, a mandatory cool-off period of up to four months may apply in case of bankruptcy or suspension of payments involving the Issuer, which, if applicable would delay the exercise (uitwinnen) of the right of pledge on the Mortgage Receivables and (iii) the Security Trustee may be obliged to enforce its right of pledge within a reasonable period following bankruptcy as determined by the judge-commissioner (rechtercommissaris) appointed by the court in case of bankruptcy of the Issuer or the Collection Foundation (as the case may be). To the extent the receivables pledged by the Issuer and / or Collection Foundation to the Security Trustee are future receivables, the right of pledge on such future receivables cannot be invoked against the estate of the Issuer and / or Collection Foundation, if such future receivables come into existence after the Issuer and / or Collection Foundation has been declared bankrupt or has been granted a suspension of payments. The Issuer has been advised that the assets pledged to the Security Trustee under the Issuer Rights Pledge Agreement should probably be regarded as future receivables. This would for example apply to amounts paid to the Issuer Collection Account following the Issuer s bankruptcy or suspension of payments. Equally, the Issuer has been advised that the assets pledged to the Security Trustee under the Collection Foundation Account Pledge Agreement should be regarded as future receivables. This would for example apply to amounts paid to the Collection Foundation Account following the Issuer s bankruptcy or suspension of payments. In view of the foregoing, the effectiveness of the rights of pledge to the Security Trustee and / or the Issuer may be limited in case of insolvency of the Issuer. Risks related to the creation of pledges on the basis of the Parallel Debt Under Dutch law it is uncertain whether a security right can be validly created in favour of a party which is not the creditor of the claim which the security right purports to secure. Consequently, in order to secure the valid creation of the pledges under the Pledge Agreements in favour of the Security Trustee, the Issuer has in the Parallel Debt Agreement, as a separate and independent obligation, by way of parallel debt, undertaken to pay to the Security Trustee amounts equal to the amounts due by it to the Secured Creditors. There is no statutory law or case law available on the concept of parallel debts such as the Parallel Debt and on the question whether a parallel debt constitutes a valid basis for the creation of security rights, such as rights of pledge (see further Section 4.9 (Security)). However, the Issuer has been advised that a parallel debt, such as the Parallel Debt, creates a claim of the Security Trustee against the Issuer for such amounts which can be validly secured by a right of pledge such as the rights of pledge created by the Pledge Agreements and the Deeds of Assignment and Pledge. 45

46 Any payments in respect of the Parallel Debt and any proceeds received by the Security Trustee are, in the case of an insolvency of the Security Trustee, not separated from the Security Trustee s estate. The Secured Creditors therefore incur a credit risk on the Security Trustee, which could lead to losses under any of the Notes and Certificates. Risks related to licence requirement under the Wft Under the Wft a special purpose vehicle which services (beheert) and administers (uitvoert) loans granted to consumers, such as the Issuer, must have a licence under the Wft. An exemption from the licence requirement is available, if the special purpose vehicle outsources the servicing of the loans and the administration of them to an entity holding a licence under the Wft. The Issuer has outsourced the servicing and administration of the Mortgage Receivables to the Servicer. The Servicer holds a licence as intermediary (bemiddelaar) under the Wft and the Issuer thus benefits from the exemption. If the Servicing Agreement is terminated, the Issuer will need to outsource the servicing and administration of the Mortgage Receivables to another licensed entity or it needs to apply for and hold a licence itself. In the latter case, the Issuer will have to comply with the applicable requirements under the Wft. If the Servicing Agreement is terminated and the Issuer has not outsourced the servicing and administration of the Mortgage Receivables to a licensed entity and, in such case, it will not hold a licence itself, the Issuer will have to terminate its activities and may have to sell the Mortgage Receivables, which could lead to losses under any of the Notes and Certificates. Insolvency proceedings and subordination provisions There is uncertainty as to the validity and / or enforceability of a provision which (based on contractual and / or trust principles) subordinates certain payment rights of a creditor to the payment rights of other creditors of its counterparty upon the occurrence of insolvency proceedings relating to that creditor. The English Supreme Court has held that a flip clause as described above is valid under English law. The Issuer has been advised that such a flip clause would be enforceable against the parties that have validly agreed thereto under Dutch law. Contrary to this, however, the U.S. Bankruptcy Court has held that such a subordination provision is unenforceable under U.S. bankruptcy law and that any action to enforce such provision would violate the automatic stay which applies under such law in the case of a U.S. bankruptcy of the counterparty. The implications of this conflicting judgment are not yet known, particularly as the U.S. Bankruptcy Court approved, in December 2010, the settlement of the case to which the judgment relates and subsequently the appeal was dismissed. If a creditor of the Issuer or a related entity becomes subject to insolvency proceedings in any jurisdiction outside England and Wales or the Netherlands (including, the United States), and it is owed a payment by the Issuer, a question arises as to whether the insolvent creditor or any insolvency official appointed in respect of that creditor could successfully challenge the validity and / or enforceability of subordination provisions included in the English and Dutch law governed Transaction Documents. In particular, based on the decision of the U.S. Bankruptcy Court referred to above, there is a risk that such subordination provisions would not be upheld under U.S. bankruptcy laws (if applicable). In general, if a subordination provision included in the Transaction Documents was successfully challenged under the insolvency laws of any relevant jurisdiction outside England and Wales or the Netherlands and any relevant foreign judgment or order was recognised by the English or Dutch courts, there can be no assurance that such actions would not adversely affect the rights of the Noteholders and Certificateholders, the market value of any of the Notes, Certificates and / or the ability of the Issuer to satisfy its obligations under the Notes and Certificates. Lastly, given the general relevance of the issues in the judgments referred to above, there is a risk that the final outcome of the dispute in such judgments (including any recognition action by the English or Dutch courts) may result in negative rating pressure in respect of the Notes. If any rating assigned to the Notes is lowered, the market value of the Notes may reduce. 46

47 Noteholders and Certificateholders are receiving no assurance or guarantee, nor is any representation made to them, and they should make their own determinations and seek independent advice None of the Seller, the Originator, the Servicer, the Interim Sub-MPT Servicer, the Issuer Administrator, the Directors, the Paying Agent, the Reference Agent, the Lead Manager, the Issuer Account Bank, the Arranger, the Collection Foundation, the Collection Foundation Account Bank, the Liquidation Agent, the Security Trustee, the Back-Up Issuer Administrator, the Back-Up Servicer Facilitator, or any of their respective affiliates makes any assurance, guarantee, representation or warranty, express or implied, as to the expected or projected success, return, timing or amount of payments, performance result, effect, consequence or benefit (including legal, regulatory, tax, financial, accounting, regulatory capital, legal investment or otherwise) to any Noteholder and Certificateholder, and none of the foregoing parties will have a fiduciary relationship with respect to any Noteholder and Certificateholder, or prospective Noteholder and Certificateholder. No Noteholder and Certificateholder may rely on any such party for a determination of expected or projected success, return, performance result, effect, consequence or benefit (including legal, regulatory, tax, financial, accounting, regulatory capital, legal investment or otherwise) with respect to any Noteholder and Certificateholder in connection with the Notes and Certificates, as applicable. Each Noteholder and Certificateholder will be required or deemed to represent that, among other things, it has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors regarding investment in the offered Notes and Certificates, as applicable, as it has deemed necessary and that the investment by it is within its powers and authority, is permissible under applicable laws governing such purchase, has been duly authorised by it and complies with applicable securities laws and other laws and regulations. Bankruptcy of the Servicer and Interim Sub-MPT Servicer may adversely affect collections on the Mortgage Loans, the ability to replace the Servicer and Interim Sub-MPT Servicer, which may ultimately lead to delays or reductions in distributions on, or other losses with respect to, the Notes and Certificates, as applicable If any of the Servicer and the Interim Sub-MPT Servicer were to go into bankruptcy or a suspension of payments is declared, it may stop performing its functions as servicer and interim servicer, as applicable, and it may be difficult to find a third party to act as successor servicer or interim servicer. Alternatively, any of the Servicer and the Interim Sub-MPT Servicer may take the position that unless the amount of its compensation is increased or the terms of its obligations are otherwise altered, it will stop performing its functions as servicer. If it were difficult to find a third party to act as successor servicer or interim servicer, the parties, as a practical matter, may have no choice but to agree to the demands of the Servicer and the Interim Sub-MPT Servicer, as applicable. Upon the termination of the appointment of the Servicer, the Security Trustee, the Issuer and the Back-Up Servicer Facilitator will use reasonable endeavours to appoint a replacement servicer who shall agree to act as servicer under a servicing agreement to be entered into on similar terms to the Servicing Agreement. It is possible that a period of adverse economic conditions resulting in high defaults and delinquencies on the Mortgage Loans and other mortgage loans serviced by any of the Servicer and the Interim Sub-MPT Servicer will increase the risk of the Servicer and the Interim Sub-MPT Servicer, as applicable, becoming subject to bankruptcy or a suspension of payments if its servicing compensation is less than its cost of servicing. The occurrence of any of these events could result in delays or reductions in distributions on the Notes and Certificates. There may also be other possible effects of a bankruptcy or suspension of payments of the Servicer that could result in delays or reductions in distributions on the Notes and Certificates. Regardless of any specific adverse determinations in a bankruptcy or suspension of payments of the Servicer and the Interim Sub-MPT Servicer, the fact that such a proceeding has been commenced could have an adverse effect on the value of the Mortgage Receivables and the liquidity and value of the Notes and Certificates. Costs in relation to replacement of the Servicer and the Interim Sub-MPT Servicer 47

48 In the event of a replacement of any of the Servicer and the Interim Sub-MPT Servicer, the Issuer will need to bear the fees and costs of the engagement of a replacement servicer. This might ultimately have a negative impact on the ability of the Issuer to perform its obligations in respect of the Notes and Certificates. Transfer of Servicing In the Interim Sub-MPT Servicing Agreement, the Interim Sub-MPT Servicer will undertake to the Servicer to procure that, no later than 31 December 2017 (or such other period agreed between the Interim Sub-MPT Servicer and the Servicer), the provision of the mortgage loan collection and payment transaction services provided by the Interim Sub-MPT Servicer under the Interim Sub-MPT Servicing Agreement are transferred to the Servicer. If any problems, delays or disputes are encountered during such transfer of servicing, this may have an adverse impact on the Servicer or the Interim Sub-MPT Servicer s ability to perform their obligations under the Servicing Agreement and the Interim Sub-MPT Servicing Agreement, respectively. This in turn, may have an adverse impact on the amount and timing of collections on the Mortgage Loans, which might ultimately have a negative impact on the ability of the Issuer to perform its obligations in respect of the Notes and Certificates. Limited liability of Servicer Under the Servicing Agreement, the Servicer will agree to perform certain services as set out in the Servicing Agreement and will accordingly, be liable to the Issuer, in respect to the performance of such services. The Servicer has capped its aggregate liability to the Issuer. Other than in case of gross negligence, fraud or wilful misconduct of the Servicer, the liability of the Servicer to the Issuer under the Servicing Agreement is capped at an aggregate amount of EUR 500,000 per calendar year. Consequently, the Issuer may be unable to recover fully (and / or in a timely manner) from the Servicer, the funds necessary to fulfil its payment obligations under any of the Notes and Certificates. If such funds are insufficient, the shortfall will be debited to the Principal Deficiency Ledger and as such, will be borne by the Noteholders and Certificateholders and the other Secured Creditors, subject to the applicable Priority of Payments. The Servicer may have conflicts of interest The Servicer may have conflicts of interest in making servicing decisions with respect to defaulted Mortgage Loans. For example, the Servicer s decision to modify a Mortgage Loan, foreclose on a defaulted Mortgage Loan or continue to make advances with respect to a defaulted Mortgage Loan may be affected by the amount of servicing compensation or by the cost of servicing the Mortgage Loan that would result from its decision. The Servicer s decision to modify rather than foreclose on a defaulted Mortgage Loan may affect the time it takes to recover that Mortgage Loan. The Servicer s discretion over the servicing of the Mortgage Loans may impact the amount and timing of funds available to make distributions on the Notes and Certificates The Servicer is obligated to service the Mortgage Loans in accordance with its customary servicing procedures. The Servicer has discretion in servicing the Mortgage Loans, including the ability to waive or modify any term of a mortgage loan and to determine the timing and method of collection and foreclosure procedures. In addition, the Servicer s customary servicing procedures may change from time to time and those changes could reduce collections on the Mortgage Loans. Although the Servicer s customary servicing procedures at any time will apply to all mortgage loans granted by the Originator and serviced by the Servicer, without regard to whether a mortgage loan has been sold to the Issuer for the benefit of the Noteholders and Certificateholders, the Servicer is not obligated to maximise collections from the mortgage loans. Consequently, the manner in which the Servicer exercises its servicing discretion or changes its customary servicing procedures could have an impact on the amount and timing of collections on the 48

49 Mortgage Loans, which would, in turn, impact the amount and timing of funds available to make distributions on any of the Notes and Certificates. Noteholders and Certificateholders will be dependent on certain parties performing their responsibilities in an accurate and timely manner To the extent the Seller, the Originator, the Servicer, the Interim Sub-MPT Servicer, the Issuer Administrator, the Directors, the Paying Agent, the Reference Agent, the Lead Manager, the Issuer Account Bank, the Arranger, the Collection Foundation, the Collection Foundation Account Bank, the Liquidation Agent, the Security Trustee, the Back-Up Issuer Administrator, the Back-Up Servicer Facilitator or any other party to the transaction fails to fully perform its obligations or does not perform its obligations in accordance with the standard for performance provided in the relevant Transaction Document in accordance with its terms, the Notes and Certificates could experience losses. Any such failure to perform may result in such party s default, and any remedy for such default, or any selection of a successor to that party, may be inadequate or may result in costs or expenses, which will be allocated to the Notes. Any risks associated with the Seller, the Originator, the Servicer, the Interim Sub-MPT Servicer, the Issuer Administrator, the Directors, the Paying Agent, the Reference Agent, the Lead Manager, the Issuer Account Bank, the Arranger, the Collection Foundation, the Collection Foundation Account Bank, the Liquidation Agent, the Security Trustee, the Back-Up Issuer Administrator, the Back-Up Servicer Facilitator or any other party to the transaction failing to perform may affect the yield to maturity of any of the Notes. Limitations on enforcement Noteholders and Certificateholders generally do not have the right to directly enforce remedies against the Servicer, the Issuer Administrator, the Issuer, the Seller or any other party to any of the Transaction Documents and instead may be required, if such Noteholders and Certificateholders obtain the agreement of the requisite percentage of Noteholders and Certificateholders, as applicable, to direct the Security Trustee, at such Noteholders and Certificateholders, as applicable, expense, to enforce the rights of the Security Trustee or take other actions as may be required under any of the Transaction Documents, provided that no Noteholder or Certificateholder will be entitled to take any steps or proceedings to procure the winding-up, administration or liquidation of the Issuer in any circumstances. Certain material interests and potential for conflicts Certain parties to the transaction have engaged in, and may in the future engage in, investment banking and / or commercial banking or other services for the Issuer or the Seller in the ordinary course of business. Other parties to the transaction may also perform multiple roles. Accordingly, conflicts of interest may exist or may arise as a result of parties having previously engaged or in the future engaging in transactions with other parties, having multiple roles or carrying out other transactions for third parties. The parties to the transaction may, pursuant to the Transaction Documents, be replaced by one or more new parties. It cannot be excluded that such a new party could also have a potential conflicting interest, which might ultimately have a negative impact on the ability of the Issuer to perform its obligations in respect of any of the Notes and Certificates. The terms of the Transaction Documents do not prevent any of the parties to the Transaction Documents from rendering services similar to those provided for in the Transaction Documents to other persons, firms or companies or from carrying on any business similar to or in competition with the business of any of the parties to the Transaction Documents. Accordingly, conflicts of interest may exist or may arise as a result of parties to this transaction: having previously engaged or in the future engaging in transactions with other parties to the transaction; having multiple roles in this transaction; and / or 49

50 (iii) carrying out other roles or transactions for third parties. Potential conflicts of interest of Morgan Stanley & Co. International plc, Morgan Stanley Principal Funding, Inc. and their affiliates roles in connection with the issuance of the Notes and Certificates; secondary trading Morgan Stanley & Co. International plc, Morgan Stanley Principal Funding, Inc., their affiliates and respective officers, members and employees (collectively, Morgan Stanley) act in a number of capacities in connection with the issuance of the Notes and Certificates. The relevant capacities are described in more detail below. Morgan Stanley has agreed in connection with the issuance of the Notes and Certificates to act as the Seller and the Retention Holder and retain a material economic interest in the securitisation transaction of not less than 5 per cent. in accordance with the EU Risk Retention Requirements (in respect of the Notes), and an eligible vertical interest in the securitisation transaction in accordance with the U.S. Risk Retention Requirements (in respect of the Notes and Certificates). See further Section 4.5 (Regulatory and Industry Compliance). In addition, Morgan Stanley agreed to act as Arranger and Lead Manager in relation to the structuring and issuance of the Notes and Certificates. Accordingly, conflicts of interest may exist or may arise as a result of the number of capacities in which Morgan Stanley are acting in connection with the issuance of any of the Notes and Certificates, which might ultimately have a negative impact on the ability of the Issuer to perform its obligations in respect of such Notes and Certificates. In addition, Morgan Stanley & Co. International plc may, from time to time, sell any of the Notes and Certificates in the secondary market at variable prices, which may, in turn, affect the liquidity and price of any such Notes and Certificates in the secondary market. Furthermore, Morgan Stanley & Co. International plc may, from time to time, sell any of the Notes and Certificates in individually negotiated transactions at variable prices in the secondary market. Risks relating to the bankruptcy of Morgan Stanley Principal Funding, Inc., as Seller Under the Mortgage Receivables Purchase Agreement, the Seller will sell and assign the Mortgage Receivables to the Issuer on the terms and subject to the conditions as set out in the Mortgage Receivables Purchase Agreement. The Mortgage Receivables Purchase Agreement is stated to be governed by and construed in accordance with Dutch law, and the effect of such sale and assignment under Dutch law is to effect an absolute transfer of the Mortgage Receivables to the Issuer. However, payments to the holders of any of the Notes and Certificates could be reduced, delayed for an indefinite period of time or eliminated if the Seller were to become a debtor in a bankruptcy case and creditors of the Seller or a bankruptcy trustee for the Seller were to assert that the transfer of the Mortgage Receivables from the Seller to the Issuer was ineffective to remove such Mortgage Receivables from the Seller s estate. Until the bankruptcy court ruled on such assertion, distributions of proceeds of the Mortgage Receivables may be subject to the automatic stay provisions of the U.S. Bankruptcy Code. If such bankruptcy court were to hold that the Mortgage Receivables were property of the Seller s bankruptcy estate, the bankruptcy court could authorise the adjustment of the debt represented by the Notes. In addition, if the transfer of the Mortgage Receivables were recharacterised as a pledge instead of a sale, certain liens that arise by operation of law on the property of the Seller would have priority over the Issuer s interest in the Mortgage Receivables. In any of such cases, distributions to the holders of any of the Notes and Certificates could be delayed or reduced. In addition, a bankruptcy court could: authorise the sale of the Mortgage Receivables if the proceeds of the sale could satisfy the amount of the debt deemed owed by the Seller or if the bankruptcy court found that certain other conditions were satisfied and / or authorise the substitution of other collateral in lieu of the Mortgage Receivables. Furthermore, collections on the Mortgage Receivables might be applied to the payments on the Notes at different times than those required by the Transaction Documents, post-proceeding 50

51 interest might be limited and, to the extent any distributions on the Mortgage Receivables were paid to the Seller, the Issuer's security interest in such distributions or the transfer of the Mortgage Receivables to the Issuer itself might be avoidable and payments on any of the Notes and Certificates would be subject to delays while the claim was being resolved. During the period of delay, the costs associated with collecting the amounts receivable under the Mortgage Receivables could be charged against such Mortgage Receivables, including the Issuer s interest in them. The Issuer has been advised, in the event that the Seller were to become a debtor in a bankruptcy case, that the Mortgage Receivables would not be held by a bankruptcy court to be part of the estate of the Seller, but there can be no assurance that a bankruptcy court would not rule otherwise. General business of Morgan Stanley and their affiliates As part of its general business, Morgan Stanley will engage in various other activities that may be inconsistent with or contrary to the interest of Noteholders and Certificateholders, including the activities described below. Morgan Stanley is part of a global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. As such, it actively makes markets in and trades financial instruments for its own account and for the accounts of customers. These financial instruments include debt and equity securities, currencies, commodities, bank loans, indices, baskets and other products. Morgan Stanley s activities include, among other things, executing large block trades and taking long and short positions directly and indirectly, through derivative instruments or otherwise. These activities may, to the extent permitted by law, also include buying or selling credit protection in respect of any of the Notes and Certificates, implementing objectives or investment strategies that are inconsistent with or contrary to the interests of Noteholders, Certificateholders and / or hedging any exposure of Morgan Stanley to any of the Notes and Certificates on the Closing Date or any time in the future. The securities and instruments in which Morgan Stanley take positions, or expects to take positions, may include any of the Notes and Certificates, or similar securities or products. Market making is an activity where Morgan Stanley buys and sells on behalf of customers, or for its own account, to satisfy the expected demand of customers. By its nature, market making involves facilitating transactions among market participants that have differing views of securities and instruments. As a result, Noteholders and Certificateholders should expect that Morgan Stanley may take positions that are inconsistent with, or adverse to, the investment objectives of the Noteholders and Certificateholders, as applicable. As a result of Morgan Stanley s various financial market activities, including acting as a research provider, investment advisor, market maker or principal investor, Noteholders and Certificateholders should expect that personnel in various businesses throughout Morgan Stanley may have and express research or investment views and make recommendations that are inconsistent with, or adverse to, the objectives of such Noteholders and Certificateholders. In the normal course of conducting its businesses, Morgan Stanley has rendered services to, been paid by, performed surveillance of, and negotiated with, numerous parties engaged in activities related to structured finance and mortgage securitisation, and may have included certain other transaction parties and any of the transaction parties respective affiliates. If Morgan Stanley becomes a Noteholder and / or Certificateholder (other than as Retention Holder), through market-making activity or otherwise, any actions that it takes in its capacity as a Noteholder and Certificateholder will not necessarily be aligned with the interests of other holders of the same Class or other Classes. To the extent any Morgan Stanley entity makes a market in any of the Notes and Certificates (which it is under no obligation to do), it would expect to receive income from the spreads between its bid and offer prices for the offered certificates. In connection with any such activity, it will have no obligation to take, refrain from taking or cease taking any action with respect to these transactions and activities based on the 51

52 potential effect on an investor in the offered certificates. The price at which Morgan Stanley may be willing to purchase such Notes and Certificates, if it makes a market, will depend on market conditions and other relevant factors and may be significantly lower than the issue price for the Notes and significantly lower than the price at which it may be willing to sell the Notes and Certificates. Furthermore, there is a reasonable expectation that a completed offering may enhance Morgan Stanley s ability to assist clients and counterparties in transactions related to the Notes and Certificates and, potentially, in similar transactions (including potentially, assisting Morgan Stanley clients in additional purchases and sales of the Notes and Certificates and hedging transactions). It can be reasonably expected that Morgan Stanley will derive fees and other revenues from these transactions. In addition, participating in a successful offering and providing related services to their clients may enhance Morgan Stanley s relationships with various parties, facilitate additional business development, and enable Morgan Stanley to obtain additional business and to generate additional revenue. Each of the foregoing relationships should be considered carefully by you before you invest in any of the Notes and Certificates. This Prospectus contains summary and limited information regarding the Transaction Documents and the Mortgage Receivables This Prospectus contains summary descriptions of certain documents, including the Mortgage Receivables Purchase Agreement, the Servicing Agreement, the Trust Deed and the Deed of Assignment and Pledge which govern the transactions described in this Prospectus, of the rules and regulations applicable to the Mortgage Loans. Such summary descriptions are necessarily incomplete and reference is made to the actual documents for a complete description of the rights and obligations of the parties thereto, to the rules and regulations applicable to the Mortgage Loans. RISK FACTORS REGARDING THE NOTES AND CERTIFICATES Factors which might affect an investor s ability to make an informed assessment of the risks associated with Notes and Certificates The Notes and Certificates are complex financial products. Investors in any of the Notes and Certificates must be able to make an informed assessment of the relevant Notes and Certificates, as applicable, based upon full knowledge and understanding of the facts and risks. Investors must determine the suitability of that investment in light of its own circumstances. The following factors might affect an investor s ability to appreciate the risk factors in this Section 2 (Risk Factors), placing such investor at a greater risk of receiving a lesser return on his investment: (iii) (iv) if such an investor does not have sufficient knowledge and experience to make a meaningful evaluation of the Notes and Certificates and the merits of investing in the relevant Notes and Certificates in light of the risk factors in this Section 2 (Risk Factors); if such an investor does not have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of his particular financial situation, the significance of these risk factors and the impact the relevant Notes and Certificates will have on his overall investment portfolio; if such an investor does not have sufficient financial resources and liquidity to bear all of the risks of an investment in the relevant Notes and Certificates, including where the currency for principal or interest payments is different from the investor s currency; if such an investor does not understand thoroughly the terms of the relevant Notes and Certificates and is not familiar with the behaviour of any relevant indices in the financial markets (including the 52

53 risks associated therewith) as such investor is more vulnerable to any fluctuations in the financial markets generally; and (v) if such an investor is not able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect his investment and his ability to bear the applicable risks. Credit Risk The Issuer is subject to the risk of default in payment by the Borrowers and the failure by the Servicer to realise or recover sufficient funds under the arrears and default procedures in respect of the relevant Mortgage Loans in order to discharge all amounts due and owing by the relevant Borrowers under the relevant Mortgage Loans. This risk may affect the Issuer s ability to make payments on the Notes and Certificates but is mitigated to some extent by certain credit enhancement features which are described in Section 5 (Credit Structure). There is no assurance that these measures will protect the holders of any Class against all risks of losses. The Issuer will report the Mortgage Loans in arrears and the Realised Losses in respect of them in the Notes and Cash Report on an aggregate basis. Investors should be aware that the Realised Losses reported may not reflect all losses that already have occurred or are expected to occur, because a Realised Loss is recorded, among other things, only after the Servicer has determined that foreclosure of the Mortgage and other collateral securing the Mortgage Receivable has been completed which process may take a considerable amount of time. The liquidity and performance of the Notes and Certificates may be adversely affected by the UK s withdrawal from the EU (Brexit) and recent conditions in the global financial markets Under the European Referendum Act 2015, a referendum on the UK s membership of the EU was held on 23 June Under the referendum the participating voters in the UK voted by a majority to cancel the rights and obligations following from the treaties and further agreements entered into by the member states establishing the EU (Brexit). Such a cancellation can however only be formally implemented by a notification to the EU under Article 50 of the Treaty on European Union (previously known as the Treaty of Maastricht). As at the date of this Prospectus, such notification has not been submitted. The expectation is that a lengthy period of negotiation (prescribed under EU law to be a maximum of two years) between the UK and the EU on the terms and conditions of such withdrawal is to commence should the UK decide to submit the Article 50 Treaty on the European Union notification. The uncertainty surrounding the implementation and effect of Brexit, including, the commencement of the Brexit negotiation period, the terms and conditions of Brexit, the uncertainty in relation to the legal and regulatory framework that would apply to the UK and its relationship with the remaining members of the EU (including, in relation to trade) during and after Brexit is being effected, has caused and is likely to cause increased economic volatility and adverse market uncertainty. Furthermore, global markets and economic conditions have been negatively impacted in recent years by the banking and sovereign debt crisis in the EU and comparable developments globally. In particular, concerns have been raised with respect to continuing economic, monetary and political conditions in the Eurozone comprised of the Member States of the EU that have adopted the single currency in accordance with the Treaty establishing the European Community (signed in Rome on 25 March 1957) as amended. The market s anticipation of these (potential) impacts (including the occurrence of Brexit) could adversely affect the business, financial condition and available liquidity of counterparties to the Issuer and their ability to perform the respective obligations under the relevant Transaction Documents. These factors and further general market conditions could adversely affect the liquidity and performance of the Notes and Certificates. Downgrade of long-term ratings of Eurozone countries may adversely affect the market value of the Notes and Certificates In response to the economic situation facing countries in the European Economic and Monetary Union, or Eurozone, based on factors including tightening credit conditions, higher risk premiums on Eurozone 53

54 sovereigns and disagreement among European policy makers as to how best to address the declining market confidence with respect to the Eurozone, on 13 January 2012, S&P downgraded the long-term credit ratings on nine members of the Eurozone, including Austria, Cyprus, France, Italy, Malta, Portugal, Slovakia, Slovenia and Spain. In addition, on 18 April 2013, Fitch downgraded the long-term credit ratings on the United Kingdom. Further downgrades of the ratings of various Eurozone members may have an adverse effect on the market value and liquidity of fixed-income instruments generally, including the offered certificates. The Netherlands is currently rated AAA by Fitch and S&P and Aaa by Moody s with a stable outlook. Risk that the Mortgage Portfolio Option Holder will not exercise the Mortgage Portfolio Purchase Option or that necessary parties do not co-operate with the exercise of the Mortgage Portfolio Purchase Option which may result in the Notes not being redeemed prior to their legal maturity Notwithstanding the increase of the Initial Margin to the Step-up Margin applicable to the Rated Notes from the First Optional Redemption Date, no guarantee can be given that the Mortgage Portfolio Option Holder will on the First Optional Redemption Date or on any Optional Redemption Date after such date actually exercise the Mortgage Portfolio Purchase Option. The exercise of such right will, among other things, depend on the ability and desire of the Mortgage Portfolio Option Holder to request the Issuer to sell Mortgage Receivables at the required amount or to provide the Issuer with sufficient funds to repay the Noteholders as further described in Condition 7(f) (Mandatory redemption under the Mortgage Portfolio Purchase Option or a Market Sale Process) and consequently this may result in the Notes not being redeemed prior to their legal maturity. Furthermore, any exercise by the Mortgage Portfolio Option Holder of the Mortgage Portfolio Purchase Option is subject to the necessary parties co-operating with the Mortgage Portfolio Option Holder to achieve the successful sale and assignment of the Mortgage Receivables. None of the Issuer, the Security Trustee, the Arranger, the Lead Manager, the Mortgage Portfolio Option Holder or any other party, have any ability to control or direct such cooperation and if any of such parties would decide not to cooperate this may result in the Notes not being redeemed prior to their legal maturity. Sale and assignment of the Mortgage Portfolio on and from the First Optional Redemption Date The sale and assignment of the Mortgage Portfolio on and from the First Optional Redemption Date under the Mortgage Portfolio Purchase Option, the Issuer Sale Process, the Market Sale Process, the Tax Call Option and the Clean-up Call Option, is conditional upon the amounts being received for the purchase price being sufficient to discharge all amounts of principal and interest due under the Notes and any amounts required to be paid in priority or pari passu with each Class of Notes in accordance with the Conditions and the Trust Deed. Risk relating to the Certificates It should be noted that, prior to the delivery of an Enforcement Notice, the Available Revenue Funds shall only be applied towards payment of the holders of the relevant Certificates after all items ranking above item (s) of the Revenue Priority of Payments have been paid in full and the Available Principal Funds shall only be applied towards payment of the holders of the relevant Certificates after all items ranking above item (l) of the Redemption Priority of Payments have been paid in full. After delivery of an Enforcement Notice, the Enforcement Available Amount shall only be applied towards payment of the holders of the relevant Certificates after all items ranking above item (m) of the Post-Enforcement Priority of Payments have been paid in full. As a consequence, there can be no assurance that sufficient funds will be available to make payments to the Certificateholders. Furthermore, the interest payable in respect of the Rated Notes will increase if the Mortgage Portfolio Purchase Option is not exercised on the First Optional Redemption Date and as a result the Issuer will have less funds available to pay the Certificateholders and therefore the rate of return in respect of the Certificates may drop if the Mortgage Portfolio Purchase Option is not exercised on the First Optional Redemption Date. See further Payments to the holders of the Class B Notes, the Class C 54

55 Notes, the Class D Notes, the Class E Notes, the Class Z Notes and the Certificates are subordinated and may be delayed or reduced in certain circumstances in Section 2 (Risk Factors)). Risk that the Issuer will not exercise its right to redeem the Notes at the Optional Redemption Dates Notwithstanding the increase in the margin applicable to each class of Rated Notes from the First Optional Redemption Date, no guarantee can be given that the Issuer will on the First Optional Redemption Date or on any Optional Redemption Date thereafter actually exercise its right to redeem the Notes. The exercise of such right will, among other things, depend on the ability of the Issuer to have sufficient funds available to redeem such Notes, for example through a sale of Mortgage Portfolio as described in Section 7 (Portfolio Documentation). However, there is no guarantee that such a sale and assignment of the Mortgage Portfolio will take place. Risk that the Issuer is not able to redeem the Notes at the Final Maturity Date The ability of the Issuer to redeem all of the Notes on the Final Maturity Date in full and to pay all amounts due to the Noteholders, including after the occurrence of an Event of Default, may depend upon whether the collections under the Mortgage Receivables are sufficient to redeem the Notes. If collections on the Mortgage Receivables are insufficient to pay all amounts due to the Noteholders, this may result in the Notes not being redeemed on or prior to the Final Maturity Date. Risk related to prepayments on the Mortgage Loans The maturity of the Notes will depend on, among other things, the amount and timing of payment of principal (including, among other things, full and partial prepayments, sale of the Mortgage Receivables by the Issuer, Net Foreclosure Proceeds upon enforcement of a Mortgage Receivable and exercise by the Mortgage Portfolio Option Holder of the Mortgage Portfolio Purchase Option) on all Mortgage Loans. The average maturity of the Notes may be adversely affected by a higher or lower than anticipated rate of prepayments on the Mortgage Loans. The rate of prepayment of Mortgage Loans is influenced by a wide variety of economic, social and other factors, including prevailing market interest rates, changes in tax laws (including, amendments to mortgage interest tax deductibility), local and regional economic conditions, declines in real estate prices, lack of liquidity or bankruptcy of Borrowers, damage or destruction of the Mortgaged Assets and changes in Borrowers behaviour (including, home-owner mobility). No guarantee can be given as to the level of prepayment that the Mortgage Loans may experience. In general, prepayment penalties that are incorporated in mortgage loan contracts tend to lower prepayment rates in the Netherlands. Penalties are generally calculated as the net present value of the interest loss to the lender upon prepayment within an interest rate period. Consequently, prepayment penalties are higher on mortgage loans with a fixed rate than mortgage loans with a floating rate, which generally have shorter interest rate periods. Prepayment penalties tend to impact borrower prepayment rates and lead to a higher number of redemption of mortgage loans at the end of an interest rate period. The prepayment rates further increase if at the end of an interest rate period an originator offers an interest rate higher than the mortgage rates offered by other originators. The prepayment rate will decrease if at the end of an interest rate period an originator offers an interest rate lower than the mortgage rates offered by other originators. Lower rates of prepayment may lead to slower prepayments of the principal amount outstanding of mortgage loans in the Netherlands. As a result, the exposure of the originators to the Borrowers of the Mortgage Loans tends to remain high over time and the Issuer will have a similar position following the purchase of the Mortgage Receivables pursuant to the Mortgage Receivables Purchase Agreement. Risks related to Interest-only Mortgage Loans 55

56 A portion of the Mortgage Loans (or parts of them) will be in the form of Interest-only Mortgage Loans. Under an Interest-only Mortgage Loan, the Borrower is not obliged to pay principal towards redemption of the relevant Mortgage Loan (or relevant part of it) until maturity. Interest is payable monthly and is calculated on the principal balance of the Mortgage Loan (or relevant part of it). The ability of a Borrower to repay an Interest-only Mortgage Loan at maturity will often depend on such Borrower s ability to refinance or sell the Mortgaged Asset or to obtain funds from another source. If a Borrower is not able to do so this may ultimately result in a reduction of amounts available to the Issuer and adversely affect its ability to make payments under the Notes and Certificates. Revenue Shortfall amounts will be deducted from the Available Principal Funds On each Notes Calculation Date an amount equal to the Revenue Shortfall as calculated on the Notes Calculation Date prior to the immediately succeeding Notes Payment Date is withheld from the Available Principal Funds and added to the Available Revenue Funds instead, which may lead to a smaller amount of Available Principal Funds being available to be applied in accordance with the Redemption Priority of Payments, which will adversely affect the Issuer s ability to make payments under the Notes and Certificates. Risks related to early redemption of the Notes The Issuer has the option, or in some cases, the obligation, as applicable, to prematurely redeem the Notes at their Principal Amount Outstanding plus accrued and unpaid interest up to (and including) the date of redemption (including any Net WAC Additional Amount) and all other amounts required to be paid in priority to or pari passu with the Notes on such date in accordance with the Post-Enforcement Priority of Payments (regardless of whether an Enforcement Notice has or has not been delivered at that time), and specifically: (iii) (iv) (v) if the Mortgage Portfolio Option Holder exercises the Mortgage Portfolio Purchase Option; if the Issuer sells and assigns the Mortgage Portfolio under an Issuer Sale Process; if the Issuer (or the Liquidation Agent and / or Portfolio Manager on the Issuer s behalf) sells and assigns the Mortgage Portfolio under a Market Sale Process; if the Issuer exercises the Tax Call Option; and if the Issuer sells and assigns the Mortgage Portfolio as a result of the Seller exercising the Clean-up Call Option, in all cases, on the terms and subject to the conditions of the Conditions, the Certificate Conditions, the Trust Deed, the Liquidation Agreement and the Mortgage Receivables Purchase Agreement. If any of the above events or circumstances occur and the Issuer redeems the Notes (regardless of whether it is an optional or mandatory redemption), the Notes will be redeemed prior to the Final Maturity Date. Noteholders may not be able to invest the amounts received as a result of the premature redemption of the Notes on conditions similar to or better than those of the Notes. Risk that changes of law will have a negative effect on the Notes and Certificates The structure of the issue of the Notes and Certificates and the credit ratings which are to be assigned to the Rated Notes are based on Dutch law in effect as at the date of this Prospectus. No assurance can be given as to the impact of any possible change to Dutch law, or administrative practice in the Netherlands after the date of this Prospectus. 56

57 Currently, the laws, regulations and administrative practice relating to mortgage-backed securities such as the Notes and Certificates are in significant state of flux in Europe and it is impossible for the Issuer to predict how these changes may in the future impact investors in the Notes and Certificates, whether directly or indirectly. The obligations of the Issuer under the Notes and Certificates are limited recourse Each of the Noteholders and Certificateholders shall only have recourse in respect of any claim against the Issuer in accordance with the relevant Priority of Payments. See further Section 5.2 (Priority of Payments). The Noteholders and Certificateholders and the other Secured Creditors shall not have recourse on any assets of the Issuer other than the Mortgage Portfolio, the balance standing to the credit of the Issuer Accounts and (iii) the amounts received under the Transaction Documents. In the event that the Security in respect of the Notes and Certificates has been fully enforced and the proceeds of such enforcement, after payment of all other claims ranking under the Trust Deed in priority to the Notes and Certificates are insufficient to pay in full all principal, interest and Certificate Payment Amounts, as applicable, if any, and other amounts whatsoever due under such Notes and Certificates, as applicable, the Noteholders and Certificateholders, as applicable shall have no further claim against the Issuer or the Security Trustee in respect of any such unpaid amounts (see Condition 3 (Status, Priority and Security) and Condition 10 (Limited recourse)). If the Issuer has insufficient funds on a Notes Payment Date, there will be a deferral of interest payments in respect of certain Notes (including any Net WAC Additional Amounts) If, on any Notes Payment Date, the Issuer has insufficient funds to make payment in full of all amounts of interest (including any accrued interest thereon) payable in respect of any Class of Notes (other than the Class A Notes), after having paid or provided for items of higher priority in the Revenue Priority of Payments, then that amount shall not be due and payable and the Issuer will be entitled under Condition 5(f) (Subordination by Deferral) to defer payment of that amount (to the extent of the insufficiency) until the following Notes Payment Date or such earlier date as interest in respect of the relevant Class of Notes becomes immediately due and repayable in accordance with the Conditions and such deferral shall not constitute an Event of Default. In accordance with Condition 5(f) (Subordination by Deferral), the Issuer may also defer payment of any Net WAC Additional Amount. To the extent that there are insufficient funds on the following Notes Payment Date or such earlier date as interest in respect of the relevant Class of Notes is scheduled to be paid in accordance with the Conditions, the deferral of interest shall continue until the Final Maturity Date. However, if there is insufficient money available to the Issuer to pay interest on any Class of Notes (other than the Class A Notes), then the relevant Noteholders may not receive all interest amounts. In the event that amounts are not paid in full on the Notes as noted above such failure will not constitute an Event of Default until the Final Maturity Date and the Security Trustee will not be able to accelerate the Notes until the Final Maturity Date and prior to such date will not be able to take any action to enforce the Security or effect a sale or disposal of the Mortgage Loans. Failure to pay interest on the Class A Notes will constitute an Event of Default and may lead to enforcement of the Security. Risk related to absence of Mortgage Reports Under the Trust Deed, in case the Issuer Administrator does not receive a Mortgage Report from the Servicer with respect to a Mortgage Calculation Period, the Issuer (or the Issuer Administrator on its behalf) shall have the right to calculate and determine the Available Revenue Funds, the Available Principal Funds and all amounts payable under the Transaction Documents using the three most recent Mortgage Reports available in respect of three Mortgage Calculation Periods in accordance with the Administration Agreement. 57

58 When the Issuer or the Issuer Administrator on its behalf receives the Mortgage Reports relating to the Mortgage Calculation Period for which such calculations have been made, it will make reconciliation calculations and reconciliation payments and credit or debit, as applicable, such amounts from the Interest Reconciliation Ledger and the Principal Reconciliation Ledger as set out in the Administration Agreement. Any calculations properly done in accordance with the Trust Deed and in accordance with the Administration Agreement, and payments made and payments not made under any of the Notes and Transaction Documents in accordance with such calculations and (iii) reconciliation calculations and reconciliation payments made or payments not made as a result of such reconciliation calculations, each in accordance with the Administration Agreement, shall be deemed to be done, made or not made in accordance with the provisions of the Transaction Documents and will in themselves not lead to an event of default or any other default or termination event under any of the Transaction Documents or breach of any triggers included therein (including, Assignment Notification Events and Pledge Notification Events). Therefore there is a risk that the Issuer pays out less or more interest (including any Net WAC Additional Amount), if any, and, respectively, less or more principal on the Notes (including any Net WAC Additional Amount) than would have been payable if Mortgage Reports were available. Risks related to the limited liquidity of the Notes and Certificates, as applicable The secondary market for the mortgage-backed securities may experience limited liquidity. Limited liquidity in the secondary market for mortgage-backed securities has had a severe adverse effect on the market value of mortgage-backed securities. Limited liquidity in the secondary market may continue to have a severe adverse effect on the market value of mortgage-backed securities, especially those securities that are more sensitive to prepayment, credit or interest rate risk and those securities that have been structured to meet the investment requirements of limited categories of investors. Consequently, an investor in any of the Notes and Certificates may not be able to sell such Notes or Certificates readily. The market values of the Notes and Certificates are likely to fluctuate and may be difficult to determine. Any of these fluctuations may be significant and could result in significant losses to such investor. In addition, the forced sale into the market of mortgage-backed securities held by structured investment vehicles, hedge funds, issuers of collateralised debt obligations and other similar entities that are currently experiencing funding difficulties could adversely affect an investor s ability to sell, and / or the price an investor receives for, the Notes or Certificates in the secondary market. Thus, Noteholders and Certificateholders bear the risk of limited liquidity of the secondary market for mortgage-backed securities and the effect thereof on the value of the Notes and Certificates, as applicable. Application of the Net WAC Cap and Timing of Interest Rate Adjustments may Reduce Interest Payments The rate of interest payable on each respective class of Rated Notes (other than the Class A Notes) and each accrual period will be based on a per annum rate equal to the lesser of the Euribor for three month deposits plus a certain Margin as described above, and the Net WAC Cap. The rate of interest payable on the Class A Notes will be based on a per annum rate equal to the Euribor for three month deposits plus a certain Margin as described above, which interest rate shall in each case be a minimum of 0.00 per cent. per annum. The Net WAC Cap limitation used in the determination of the Net WAC Additional Amounts will be directly based on the weighted-average current interest rate of the Mortgage Loans for the related Mortgage Calculation Period, net of certain allocable fees and expenses of the Issuer (the Net WAC). The Net WAC for each related Mortgage Calculation Period will be adjusted for each Notes Payment Date by dividing it by a fraction, expressed as a percentage equal to the Floating Rate Note Percentage, the result of which is the Net WAC Cap. The initial Floating Rate Note Percentage is expected to be approximately 91 per cent. of the principal balance of the Mortgage Loans as of the Cut-Off Date. On any Notes Payment Date where the Floating Rate Note Percentage is zero, the Net WAC Cap will be equal to the Net WAC. Since the basis on which the Mortgage Loans accrue interest (being primarily based on Euribor for one 58

59 month deposits), which differs from the Euribor for three month deposits, the corresponding basis mismatch could result in the quarterly payments of interest in respect of the Rated Notes becoming subject to the Net WAC Cap. To the extent that the application of the Net WAC Cap results in a Net WAC Additional Amount in respect of a Class of the Rated Notes (other than the Class A Notes), such Net WAC Additional Amount will be deferred and will be due and payable on the following Notes Payment Date(s), unless such amounts have been paid in accordance with the Revenue Priority of Payments on such Notes Payment Date, but such deferred payments will be subordinated to payments of current interest due on each Class of Rated Notes on each following Notes Payment Date. The foregoing could result in Noteholders receiving less by way of a payment of interest in any Interest Period than they would otherwise have expected to receive. Payments to the holders of the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class Z Notes and the Certificates are subordinated and may be delayed or reduced in certain circumstances The Class A Notes will rank pari passu without preference or priority among themselves in relation to payment of interest and principal at all times, as provided in the Conditions and the Transaction Documents. The Class B Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class B Net WAC Additional Amount (if any) at all times, but subordinate to the Class A Notes, as provided in the Conditions and the Transaction Documents (except that all payments in respect of any Class B Net WAC Additional Amount will rank subordinate to all payments due under the Notes other than all payments in respect of any Class C Net WAC Additional Amount, any Class D Net WAC Additional Amount, any Class E Net WAC Additional Amount and any principal amounts due under the Class Z Notes). The Class C Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class C Net WAC Additional Amount (if any) at all times, but subordinate to the Class A Notes and the Class B Notes, as provided in the Conditions and the Transaction Documents (except that all payments in respect of any Class C Net WAC Additional Amount will rank subordinate to all payments due under the Notes other than all payments in respect of any Class D Net WAC Additional Amount, any Class E Net WAC Additional Amount and in or towards satisfaction of any principal amounts due under the Class Z Notes). The Class D Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class D Net WAC Additional Amount (if any) at all times, but subordinate to the Class A Notes, the Class B Notes and the Class C Notes, as provided in the Conditions and the Transaction Documents (except that all payments in respect of any Class D Net WAC Additional Amount will rank subordinate to all payments due under the Notes other than all payments in respect of any Class E Net WAC Additional Amount and any principal amounts due under the Class Z Notes). The Class E Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class E Net WAC Additional Amount (if any) at all times, but subordinate to the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes, as provided in the Conditions and the Transaction Documents (except that all payments in respect of any Class E Net WAC Additional Amount will rank subordinate to all payments due under the Notes other than any principal amounts due under the Class Z Notes). The Class Z Notes will rank pari passu without preference or priority among themselves in relation to payment of principal at all times, but subordinated to the Rated Notes and any Net WAC Additional Amount, as provided in the Conditions and the Transaction Documents. The Class Z Notes do not pay interest. There is no assurance that the subordination provisions summarised above will protect the holders of the Notes from all the risks of losses on the Notes. 59

60 The R1 Certificates and the R2 Certificates will rank pari passu without preference or priority among themselves, but subordinate to the Notes and any Net WAC Additional Amount, as provided in the Conditions and the Transaction Documents. In addition to the above, payments on the Notes and the Certificates are subordinate to payments of certain fees, costs and expenses payable to the other Secured Creditors (including the Security Trustee, the Servicer, the Issuer Administrator, the Credit Rating Agencies, the Issuer Account Bank, the Paying Agent, the Reference Agent and the Liquidation Agent) and certain third parties. The priority of payments under the Notes and the Certificates are further set out in Section 5.2 (Priority of Payments). Risk related to the ECB Purchase Programme In September 2014, the ECB initiated an asset purchase programme whereby it envisaged to bring inflation back to levels in line with the ECB s objective to maintain the price stability in the euro area and, also, to help enterprises across the EU members participating in the Euro to gain better access to credit, boost investments, create jobs and thus support overall economic growth. The expanded asset purchase programme commenced in March 2015 and encompasses the earlier announced asset-backed securities purchase programme and the covered bond purchase programme. These programmes are intended to be carried out until at least March It remains to be seen what effect these purchase programmes will have on the volatility in the financial markets and the economy generally. In addition, the continuation, the amendments to or the termination of these purchase programmes could have an adverse effect on the secondary market value of the Notes and the liquidity in the secondary market for the Notes and Certificates. Risk related to the Notes and Certificates held in global form The Notes and Certificates will initially be held by Euroclear or Clearstream, Luxembourg in the form of a Global Note and Global Certificate, as applicable which will be exchangeable for Definitive Notes and Definitive Certificates, as applicable in limited circumstances, as more fully described in Section 4.3 (Form of Notes and Certificates). For as long as any Notes and Certificates are represented by a Global Note and Global Certificate, as applicable, held by Euroclear or Clearstream, Luxembourg, payments of any principal, interest, if any, and any other amounts on a Global Note and Global Certificate will be made through Euroclear or Clearstream, Luxembourg against presentation or surrender (as the case may be) of the relevant Global Note and Global Certificate and, in the case of a Temporary Global Note and Temporary Global Certificate, certification as to non-u.s. beneficial ownership. The bearer of the relevant Global Note and Global Certificate, as applicable, being Euroclear or Clearstream, Luxembourg, shall be treated by the Issuer and the Paying Agent as the sole holder of the relevant Notes and Certificates, as applicable represented by such Global Note and Global Certificate, as applicable with respect to the payment of principal, interest and Certificate Payments, if any, and any other amounts payable in respect of the Notes and Certificates, as applicable. Notes and Certificates which are represented by a Global Note and Global Certificate, as applicable, will be transferable only in accordance with the rules and procedures of Euroclear or Clearstream, Luxembourg. Thus, the Noteholders and Certificateholders will have to rely on the procedures of Euroclear or Clearstream, Luxembourg for transfers, payments and communications from the Issuer, which may cause the Issuer being unable to meet its obligations under the Notes and Certificates, as applicable. Noteholders and Certificateholders may not receive and may not be able to trade Notes and Certificates in definitive form It is possible that the Notes and Certificates, as applicable, may be traded in amounts that are not integral multiples of EUR 100,000. In such a case, a holder who, as a result of trading such amounts, holds an 60

61 amount which is less than EUR 100,000 in its account with the relevant clearing system in case Notes and Certificates, as applicable, in definitive form are issued may not receive a Note or Certificate in definitive form in respect of such holding (should Notes and Certificates, as applicable, in definitive form be issued) and may need to purchase a principal amount of Notes or Certificates, as applicable, such that its holding amounts to at least EUR 100,000. If Notes and Certificates, as applicable, in definitive form are issued, holders should be aware that such Notes and Certificates, as applicable, in definitive form which have a denomination that is not an integral multiple of EUR 100,000 may be illiquid and difficult to trade. The Security Trustee is not obliged to act in certain circumstances Upon the occurrence of an Event of Default, the Security Trustee at its discretion may, or if so directed by an Extraordinary Resolution of the Noteholders or Certificateholders, as applicable, of the Most Senior Class, as applicable (subject, in each case, to being indemnified to its satisfaction) shall (but in the case of the occurrence of any of the events mentioned in Condition 11 (Events of Default) and Certificates Condition 11 (Certificates Events of Default), only if the Security Trustee shall have certified in writing to the Issuer that such an event is, in its opinion, materially prejudicial to the Noteholders or the Certificateholders, as applicable, of the relevant Class) deliver an Enforcement Notice to the Issuer. In exercising its discretion as to whether or not to give an Enforcement Notice to the Issuer, the Security Trustee shall not be required to have regard to the interests of the holders of any Class of Notes or Certificates, as applicable, ranking junior to the Most Senior Class. At any time after the delivery of an Enforcement Notice, the Security Trustee may at its discretion, and without further notice, take such proceedings as it may think fit against the Issuer to enforce the terms of this Trust Deed, the Parallel Debt Agreement, including the making of a demand for payment under such agreement, the Pledge Agreements, the Notes, the Certificates, and any of the other Transaction Documents to which the Security Trustee is a party. However the Security Trustee shall not be bound to take any such proceedings unless it shall have been directed to do so by an Extraordinary Resolution of the Noteholders or Certificateholders of the Most Senior Class, as applicable, and it shall have been indemnified to its satisfaction. Risk relating to conflicts between Noteholders, Certificateholders and other Secured Creditors The Conditions and the Certificates Conditions contain provisions for calling meetings of Noteholders and Certificateholders, respectively, to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders and Certificateholders including Noteholders and Certificateholders who did not attend and vote at the relevant meeting, and Noteholders and Certificateholders who voted in a manner contrary to the requisite majority for such vote. Specifically, an Extraordinary Resolution passed at any Meeting of the Most Senior Class, as applicable, shall be binding upon all Noteholders and Certificateholders of a Class irrespective of the effect upon them, provided that in case of an Extraordinary Resolution approving a Basic Terms Change, such Extraordinary Resolution shall not be effective unless it shall have been approved by Extraordinary Resolutions of Noteholders and Certificateholders of each such Class or unless and to the extent that it shall not, in the sole opinion of the Security Trustee, be materially prejudicial to the interests of Noteholders and Certificateholders of each such Class. All resolutions, including Extraordinary Resolutions, duly adopted at a Meeting are binding upon all Noteholders of the relevant Class and Certificateholders of that Class, as applicable, whether or not they are present at the Meeting. Changes to the Transaction Documents, the Conditions and the Certificate Conditions, as applicable, may therefore be made without the approval of the Noteholders or Certificateholders of a relevant Class of Notes (other than the Most Senior Class, as applicable), in case of a resolution of the Noteholders or Certificateholders of the Most Senior Class or an individual Noteholder or Certificateholder in case of a resolution of the relevant Class and / or in each case without the Noteholder or Certificateholder being present at the relevant meeting. See further Condition 15 (Meetings of Noteholders and Certificateholders) and Certificate Condition 15 (Meetings of Certificateholders). Noteholders and Certificateholders are therefore exposed to the risk that changes are 61

62 made to the Conditions, Certificate Conditions and Transaction Documents, as applicable, without their knowledge or consent and / or which may have an adverse effect on it. If, in the opinion of the Security Trustee, there is a conflict between the interests of holders of different Classes, the Security Trustee will have regard only to the interests of (whilst there are Notes outstanding) the holders of the Most Senior Class, as applicable, and will not have regard to any lower ranking Class and shall have regard to the interests of the other Secured Creditors only to pay such parties any monies received and payable to them and to act in accordance with the Post-Enforcement Priority of Payments. As a result, holders of Notes and Certificates other than the holders of the Most Senior Class, as applicable, may not have their interests taken into account by the Security Trustee when the Security Trustee exercises any power, authority, duties and discretions. Risk that the Security Trustee may agree to modifications, waiver or authorisations without the prior consent of any Noteholders, Certificateholders or other Secured Creditors Noteholders, Certificateholders and Secured Creditors are exposed to the risk that the Conditions, Certificate Conditions and / or Transaction Documents may be modified without their knowledge or consent, and which modification may have an adverse effect on them. Under the Trust Deed, the Security Trustee may agree without the consent of the Noteholders, Certificateholders or any of the other Secured Creditors (not party to such document) to any modification of any of the provisions of the Trust Deed, the Notes, the Certificates or any other Transaction Document which is of a formal, minor or technical nature or is made to correct a manifest error, and except for a Basic Terms Change any other modification, and any waiver or authorisation of any breach or proposed breach, of any of the provisions of the Trust Deed, the Notes, the Certificates or any other Transaction Document, which is in the opinion of the Security Trustee not materially prejudicial to the interests of the Most Senior Class, as applicable (or, if there are no Notes outstanding, the interest of the holders of the majority in number of the Certificates), provided that a Credit Rating Agency Confirmation in respect of each Credit Rating Agency is available in respect of such modification, authorisation or waiver. Any such modification, authorisation or waiver shall be binding on the Noteholders, the Certificateholders and other Secured Creditors and, if the Security Trustee so requires, such modification shall be notified to the Noteholders in accordance with Condition 14 (Notices) and the Certificateholders, as applicable, in accordance with Certificate Condition 14 (Notices) as soon as practicable thereafter. Except in the case of Basic Terms Change the Security Trustee shall agree with the Issuer and the other parties to any Transaction Document, without the consent of the Noteholders, Certificateholders or any of the other Secured Creditors (not party to such document), to any modification of the relevant Transaction Documents in order to enable the Issuer to comply with any obligation which applies to it under Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies, and in particular the third subparagraph of Article 8b(3) thereof and Commission Delegated Regulation (EU) 2015/3 (including, any associated regulatory technical standards and advice, guidance or recommendations from relevant supervisory regulators), as amended from time to time (the CRA3 Requirements), including any requirements imposed by any proposed Simple, Transparent and Standardised Securitisation regulation (the STS Regulation) proposed by the European Commission or any other obligation which applies to it under the CRA3 Requirements, the STS Regulation and / or any new regulatory requirements, subject to receipt by the Security Trustee of a certificate of the Issuer certifying to the Security Trustee that the amendments requested by the Issuer are to be made solely for the purpose of enabling the Issuer to satisfy its requirements under the CRA3 Requirements, provided that the Security Trustee shall not be obliged to agree to any modification which, in the reasonable opinion of the Security Trustee, would have the effect of exposing the Security Trustee to any additional liability or adding to or increasing the obligations, liabilities or duties, or decreasing the protections, of the Security Trustee in respect of the Notes, the Certificates, the relevant Transaction Documents, the Conditions and / or Certificate Conditions. Each other party to any relevant Transaction Document shall cooperate to the extent reasonably 62

63 practicable with the Issuer in amending such Transaction Documents to enable the Issuer to comply with the CRA3 Requirements and / or the STS Regulation. Except in the case of Basic Terms Change, the Security Trustee shall agree with the Issuer and with the other parties to any Transaction Document, without the consent of the Noteholders, Certificateholders or any of the other Secured Creditors (not party to such document) to any modification of the relevant Transaction Documents for the purpose of complying with, or implementing or reflecting, any change in the criteria of one or more of the Credit Rating Agencies which may be applicable from time to time, provided that in relation to any such amendment: the Issuer certifies in writing to the Security Trustee that such modification is necessary to comply with such criteria or, as the case may be, is solely to implement and reflect such criteria; and in the case of any modification to a Transaction Document proposed by any of the Collection Foundation Account Bank or the Issuer Account Bank in order (x) to remain eligible to perform its role in such capacity in conformity with such criteria and / or (y) to avoid taking action which it would otherwise be required to take to enable it to continue performing such role (including, posting collateral or advancing funds): (a) (b) the party proposing the modification to a Transaction Document certifies in writing to the Issuer and the Security Trustee that such modification is necessary for the purposes described in paragraph (x) and / or (y) above (and in the case of a certification provided to the Issuer, the Issuer shall certify to the Security Trustee that it has received the same from such party); either: i. the party proposing the modification to a Transaction Document, if possible and if necessary with the cooperation of the Issuer, obtains from each of the Credit Rating Agencies written confirmation (or certifies in writing to the Issuer and the Security Trustee that it has been unable to obtain such confirmation) that such modification would not result in a downgrade, withdrawal or suspension of the then current ratings assigned to any Class of Notes by such Credit Rating Agency and would not result in any Credit Rating Agency placing any Notes on rating watch negative (or equivalent) and, if relevant, delivers a copy of each such confirmation to the Issuer and the Security Trustee; or ii. the Issuer certifies in writing to the Security Trustee that the Credit Rating Agencies have been informed of the proposed modification and none of the Credit Rating Agencies has indicated within 30 Business Days after being informed thereof that such modification would result in (x) a downgrade, withdrawal or suspension of the then current ratings assigned to any Class of the Notes by such Credit Rating Agency or (y) such Credit Rating Agency placing any Notes on rating watch negative (or equivalent); and (c) the party proposing the modification to a Transaction Document pays all costs and expenses (including legal fees) incurred by the Issuer and the Security Trustee or any other party which is a party to such Transaction Document in connection with such modification. Except in the case of Basic Terms Change, the Security Trustee shall agree with the Issuer and with the other parties to any Transaction Document, without the consent of the Noteholders Certificateholders or any other Secured Creditor (that is not party to such document), to any modification of such Transaction Documents for the purpose of complying with any changes in the requirements of Article 405 of the CRR, Article 17 of the AIFMD, Article 51 of the AIFMR, Article 254 of Solvency II or Section 15G of the Securities Exchange Act of 1934, as added by section 941 of the Dodd-Frank Wall Street Reform and Consumer 63

64 Protection Act, after the Closing Date, including as a result of the adoption of regulatory technical standards in relation to the CRR or the AIFMR or any other risk retention legislation or regulations or official guidance in relation thereto, or complying with any risk retention requirements which may replace any of the requirements of Article 405 of the CRR, Article 17 of the AIFMD, Article 51 of the AIFMR, Article 254 of Solvency II or Section 15G of the Securities Exchange Act of 1934, provided in each case that the party proposing the modification to a Transaction Document, supported by the Issuer by certifying such modification in writing (provided the Issuer believes such proposal is not prejudicial to its interest) if requested by the party proposing the modification, certifies to the Security Trustee in writing that such modification is required solely for such purpose and has been drafted solely to such effect. In relation to any such proposed modification, the Issuer is required to give at least 30 calendar days notice to the Noteholders of each Class of the proposed modification in accordance with Condition 14 (Notices) and by publication on Bloomberg on the Company News screen relating to the Notes. However, Noteholders should be aware that in relation to such amendments, if Noteholders representing at least 10 per cent. of the aggregate Principal Amount Outstanding of the Most Senior Class, as applicable, have not contacted the Security Trustee in writing (or otherwise in accordance with the then current practice of any applicable clearing system through which such Notes may be held) within such notification period notifying the Security Trustee that such Noteholders do not consent to the modification, the modification will be passed without Noteholder consent. If Noteholders representing at least 10 per cent. of the aggregate Principal Amount Outstanding of the Most Senior Class, as applicable, have notified the Issuer or the Paying Agent in writing (or otherwise in accordance with the then current practice of any applicable clearing system through which such Notes may be held) within the notification period referred to above that they do not consent to the modification, then such modification will not be made unless an Extraordinary Resolution of the Noteholders of the Most Senior Class, as applicable, is passed in favour of such modification in accordance with Condition 15 (Meetings of Noteholders and Certificateholders). In relation to any proposed amendment each of the Issuer and the Security Trustee is entitled to incur reasonable costs to obtain advice from external advisers in relation to such proposed amendment. This may ultimately have a negative impact on the ability of the Issuer to perform its obligations under the Notes and Certificates. The full requirements in relation to any modification, waiver or authorisation for the purpose of complying with, or implementing or reflecting, any change in the criteria of one or more of the Credit Rating Agencies which may be applicable from time to time is set out in Condition 16 (Modifications, waiver, authorisations). No obligation for the Issuer to compensate Noteholders and Certficateholders for any tax withheld on behalf of any tax authority As provided in Condition 8 (Taxation) and Certificate Condition 8 (Taxation), if withholding of, or deduction for, or on account of any present or future taxes, duties, assessments or changes of whatever nature are imposed by or on behalf of the Netherlands, any authority therein or thereof having power to tax, the Issuer will make the required withholding or deduction of such taxes, duties, assessments or charges for the account of the Noteholders and Certificateholders, as applicable, as the case may be, and shall not be obliged to pay any additional amounts to the Noteholders. In certain circumstances, the Issuer, the Noteholders and Certificateholders, as applicable, may be subject to U.S. withholding tax under FATCA. Pursuant to certain provisions of the U.S. Internal Revenue Code of 1986, commonly known as FATCA, a foreign financial institution may be required to withhold on certain payments it makes ( foreign passthru payments ) to persons that fail to meet certain certification, reporting, or related requirements. A number of 64

65 jurisdictions (including the Netherlands) have entered into, or have agreed in substance to, intergovernmental agreements with the United States to implement FATCA (IGAs), which modify the way in which FATCA applies in their jurisdictions. Under the provisions of IGAs as currently in effect, a foreign financial institution in an IGA jurisdiction would generally not be required to withhold under FATCA or an IGA from payments that it makes. Certain aspects of the application of the FATCA provisions and IGAs to instruments such as the Notes and Certificates, including whether withholding would ever be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Notes and Certificates, are uncertain and may be subject to change. Even if withholding would be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Notes and Certificates, such withholding would not apply prior to 1 January 2019 and Notes and Certificates issued on or prior to the date that is six months after the date on which final regulations defining foreign passthru payments are filed with the U.S. Federal Register generally would be grandfathered for purposes of FATCA withholding unless materially modified after such date. Holders should consult their own tax advisors regarding how these rules may apply to their investment in any of the Notes and Certificates. In the event any withholding would be required pursuant to FATCA or an IGA with respect to payments on the Notes and Certificates, no person will be required to pay additional amounts as a result of the withholding. Common Reporting Standard A number of jurisdictions have entered into or are committed to entering into inter-governmental agreements for the automatic cross-border exchange of tax information on a multilateral basis under a regime known as the OECD Common Reporting Standard (CRS). The Netherlands is a signatory to the OECD Multilateral Convention in respect of the CRS with various jurisdictions. The Netherlands has committed, along with around 55 other countries, to the early implementation of the CRS, with the first reporting year being 2016 and the reporting obligations commencing in The Dutch government has implemented EU Council Directive 2014/107/EU in its domestic legislation, providing for the required legal basis for the CRS, which requires Dutch Financial Institutions to identify specified persons in the jurisdictions that have implemented, or are implementing the CRS, and to report related information to the Dutch tax authorities (for automatic exchange with the relevant tax authorities in such jurisdictions) in order to avoid the commission of an offence, which may involve the imposition of financial penalties or other sanctions. Regulatory initiatives may have an adverse impact on the regulatory treatment of the Notes and Certificates In Europe, the United States and elsewhere there is increased political and regulatory scrutiny of the assetbacked securities industry. This has resulted in a number of measures for increased regulation which are currently at various stages of implementation and which may have an adverse impact on the regulatory position for certain investors in securitisation exposures and / or on the incentives for certain investors to hold asset-backed securities, and may thereby affect the liquidity of such securities. Investors in the Notes and Certificates are responsible for analysing their own regulatory position and none of the Issuer, the Seller, the Originator, the Servicer, the Interim Sub-MPT Servicer, the Issuer Administrator, the Directors, the Paying Agent, the Reference Agent, the Arranger, the Lead Manager, the Issuer Account Bank, the Collection Foundation, the Collection Foundation Account Bank, the Liquidation Agent, the Security Trustee, the Back-Up Issuer Administrator or the Back-Up Servicer Facilitator makes any representation to any prospective investor or purchaser of any of the Notes and Certificates regarding the regulatory treatment of their investment on the Closing Date or at any time in the future. Investors should, among other things, be aware of the EU risk retention and due diligence requirements which currently apply, or are expected to apply in the future, in respect of various types of EU regulated investors including credit institutions, authorised alternative investment fund managers, investment firms, insurance and reinsurance undertakings and UCITS funds. Among other things, such requirements restrict a 65

66 relevant investor from investing in asset-backed securities unless that investor is able to demonstrate that it has undertaken certain due diligence in respect of various matters including its note and / or certificate position, the underlying assets and (in the case of certain types of investors) the relevant sponsor or originator and the originator, sponsor or original lender in respect of the relevant securitisation has explicitly disclosed to the investor that it will retain, on an on-going basis, a net economic interest of not less than 5 per cent. in respect of certain specified credit risk tranches or asset exposures. Failure to comply with one or more of the requirements may result in various penalties, including, in the case of those investors subject to regulatory capital requirements, the imposition of a penal capital charge on any notes and certificates acquired by the relevant investor. Aspects of the requirements and what is or will be required to demonstrate compliance to national regulators remain unclear. The risk retention and due diligence requirements described above apply, or are expected to apply, in respect of the Notes and Certificates, as applicable. With respect to the commitment of the Seller to retain a material net economic interest in the securitisation and with respect to the information to be made available by the Issuer or another relevant party, please see the statements set out in (see further Section 4.5 (Regulatory and Industry Compliance) and Section 8 (General)). Relevant investors are required to independently assess and determine the sufficiency of the information described above for the purposes of complying with any relevant requirements. Prospective investors should therefore make themselves aware of the changes and requirements described above (and any corresponding implementing rules of their regulator), where applicable to them, in addition to any other applicable regulatory requirements with respect to their investment in the Notes and Certificates, as applicable. The matters described above and any changes to the regulation or regulatory treatment of any of the Notes and Certificates for some or all investors may negatively impact the regulatory position of individual investors and, in addition, have a negative impact on the price and liquidity of any of the Notes and Certificates in the secondary market. Implementation of and / or changes to Basel III and Solvency II may affect the regulatory capital requirements and / or the liquidity associated with a holding of the Notes for certain investors In Basel III, the Basel Committee on Banking Supervision (the Basel Committee) has made significant amendments to Basel II which aim at a substantial strengthening of capital rules, including new capital and liquidity requirements intended to reinforce capital standards and to establish minimum liquidity standards and a maximum leverage ratio for financial institutions. The changes refer to, among other things, new requirements for the capital base, measures to strengthen the capital requirements for counterparty credit exposures arising from certain transactions and the introduction of a leverage ratio as well as short-term and longer-term standards for funding and liquidity (referred to as the Liquidity Coverage Ratio and the Net Stable Funding Ratio, respectively). Member countries are required to implement the new capital standards and the new Liquidity Coverage Ratio as soon as possible (with provision for phased implementation, meaning that the measures will not apply in full until January 2019), the new Liquidity Coverage Ratio from January 2015 and the Net Stable Funding Ratio from January The European authorities have indicated that they support Basel III in general. The capital rules of Basel III have been implemented through a directive and a regulation adopted on 26 June 2013 by the Council of the European Union (collectively referred to as CRD IV), which replaced the directives 2006/48/EC and 2006/49/EC, as amended by directive 2009/111/EC. CRD IV entered into force on 1 January 2014, with full implementation by January However, CRD IV allows individual Member States to implement a stricter definition and / or level of capital more quickly than is envisaged under Basel III. On 1 August 2014, CRD IV was implemented in Dutch legislation. In December 2013, the Basel Committee has issued a second consultative document on revisions to the securitisation framework, including draft standards text. The second consultative document follows the first consultative document published in December The major changes in the second consultative document in relation to the first consultative document include changes to the hierarchy of approaches and 66

67 changes to calibration and other clarifications (including the proposal of the Basel Committee to set a 15 per cent. risk-weight floor for all approaches, instead of the 20 per cent. floor originally proposed). Comments on the consultative document and the proposed standards text were due on 21 March In December 2014, the Basel Committee has published a final document presenting the revised securitisation framework (the Final Document) to address a number of shortcomings in the Basel II securitisation framework and to strengthen the capital standards for securitisation exposures held in the banking book. No significant changes were made to the hierarchy of approaches relative to the hierarchy proposed in the second consultative document. The main changes in the Final Document in relation to the second consultative document include the incorporation of tranche maturity as an additional risk driver and the application of a haircut in order to smooth the impact of maturity on capital charges when legal maturity is used, the reduction of the risk weights for longer-maturity tranches assigned under the securitisation external ratings-based approach and (iii) the abandonment to include a granularity adjustment in respect of credit ratings. On 11 July 2016 the Basel Committee published an updated standard for the regulatory capital treatment of securitisation exposures. By including the regulatory capital treatment for simple, transparent and comparable securitisations (STC securitisations, the Basel Committee s equivalent for securitisations under the STS Regulation), this standard amends the Basel Committee s 2014 capital standards for securitisations. The updated standard published on 11 July 2016 sets out additional criteria for differentiating the capital treatment of STC securitisations from that of other securitisation transactions. The additional criteria, for example, exclude transactions in which the standardised risk weights for the underlying assets exceed certain levels. From the updated standard it also follows that the risk weight for senior exposures under a STC securitisation has scaled down from 15 per cent. to 10 per cent. Furthermore, pursuant to the directive of the European Parliament and of the Council of the European Union of 25 November 2009 on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II), more stringent rules will apply for European insurance companies from January 2016 in respect of instruments such as the Notes in order to qualify as regulatory capital (toetsingsvermogen c.q. solvabiliteitsmarge). On 18 January 2015 the Solvency II Regulation entered into force. The implementing rules set out more detailed requirements for individual insurance undertakings as well as for groups, based on the provisions set out in Solvency II. Basel II, Basel III and Solvency II even to a greater extent, will affect the risk-weighting of the Notes in respect of certain investors if those investors are regulated in a manner which will be affected by these rules. Consequently, prospective investors should consult their own advisers as to the consequences of and the effect on them of the application of Basel II, Basel III and Solvency II, as implemented by their own regulator, to their holding of any Notes. It cannot be excluded that further amendments will be proposed and will have to be implemented in the legislation of the relevant EU Member States which may have a further impact on, among other things, the risk weighting, liquidity and value of the Notes. Neither the Issuer, the Lead Manager nor the Security Trustee are responsible for informing Noteholders of the effects on the changes to risk weighting of the Notes which among others may result from the adoption by their own regulator of Basel II, Basel III or Solvency II (whether or not in its current form or otherwise). Applicability of risk retention and due diligence requirements Investors should also be aware of Article 17 of the European Union Alternative Investment Fund Managers Directive (Directive 2011/61/EU) (AIFMD), as supplemented by Section 5 of Commission Delegated Regulation (EU) No 231/2013) (AIFMR), which took effect on 22 July The provisions of Section 5 of Chapter III of the AIFMR provide for risk retention and due diligence requirements in respect of alternative investment fund managers that are required to become authorised under the AIFMD and which assume exposure to the credit risk of a securitisation on behalf of one or more alternative investment funds. While 67

68 such requirements are similar to those which apply under Part 5 of the CRR, they are not identical and, in particular, additional due diligence obligations apply to the relevant alternative investment fund managers. As at the Closing Date, the Retention Holder in its capacity as the originator within the meaning of Article 405 CRR has separately undertaken to the Issuer, the Security Trustee, the Seller, the Arranger and the Lead Manager that it will comply with the EU Risk Retention Requirements, by holding no less than 5 per cent. of the nominal value of each of the Classes of Notes sold or transferred to investors. In addition, the Retention Holder shall provide Noteholders with all relevant information that such Noteholders may require to comply with their obligations under the applicable provisions of the CRR, the AIFMR and the Solvency II Regulation, including to make appropriate disclosures, or to procure that appropriate disclosures are made, to Noteholders about the retained net economic interest in the securitisation transaction and to ensure that the Noteholders have readily available access to all materially relevant data. The Retention Holder has been advised that it may be classified as an originator within the meaning of Article of the CRR, Article 51 of the AIFMR and Article 254 of the Solvency II Regulation and may satisfy the requirement to retain a 5 per cent. or higher net economic interest in the transaction. For the purpose of this risk factor, all such requirements, together with Part 5 of the CRR, Section 5 of Chapter III of the AIFMR and Chapter VIII of Title I of the Solvency II Regulation, are referred to as the Securitisation Retention Requirements. Although the European Banking Authority report on securitisation risk retention, due diligence and disclosure dated 22 December 2014 and the legislative proposals of the European Commission relating to the draft securitisation regulation published on 30 September 2015 as amended by the EU Council Compromise achieved in December 2015 provide further guidance on the Securitisation Retention Requirements there remains considerable uncertainty with respect to the Securitisation Retention Requirements and it is not clear what will be required to demonstrate compliance to national regulators. Investors who are uncertain as to the requirements that will need to be complied with in order to avoid the additional regulatory charges for noncompliance with the Securitisation Retention Requirements should seek guidance from their regulator. Similar requirements to those set out in the Securitisation Retention Requirements are expected to be implemented for other EU regulated investors (such as investment firms and certain hedge fund managers) in the future. The Securitisation Retention Requirements and due diligence requirements described above and any other changes to the regulation or regulatory treatment of the Notes for some or all investors may negatively impact the regulatory position of individual investors and, in addition, have a negative impact on the price and liquidity of the Notes in the secondary market. U.S. credit risk retention Section 941 of the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 amended the Securities Exchange Act of 1934, as amended (the Exchange Act), to add a new Section 15G, which requires the securitizer of asset-backed securities to retain at least 5 per cent. of the credit risk to the assets collateralizing the asset-backed securities. A final rule (the U.S. Risk Retention Requirements) has been adopted under Section 15G of the Exchange Act, which rule became effective for securitisation transactions backed by assets such as the Mortgage Receivables on 24 December The relevant portion of the U.S. Risk Retention Requirements generally requires that the sponsor (which is defined as a person who organizes and initiates a securitisation transaction by selling or transferring assets ) of a securitisation transaction or its majority-owned affiliate (as defined in the U.S. Risk Retention Requirements) acquire and retain for a period described below an eligible horizontal residual interest, an eligible vertical interest (an EVI) or a combination of the two that represents 5 per cent. of the credit risk associated with the securitisation transaction. In order to comply with Section 15G of the Exchange Act and the U.S. Risk Retention Requirements thereunder, the Seller (which is the sponsor for purposes of the definition thereof set forth above) intends to acquire on the Closing Date and thereafter retain until the end of the Risk Retention Period (as defined below) an EVI consisting of 5 per cent. of the aggregate nominal 68

69 amount of each Class of Notes and Certificates being issued by the Issuer. The terms of each Class of Notes and Certificates are described in this Prospectus. In the case of a securitisation transaction backed by residential mortgages, the Risk Retention Period will commence on and including the Closing Date and will end on the date that is the later of: five years after the Closing Date; and the date on which the total unpaid principal balance of the Mortgage Receivables has been reduced to 25 per cent. of the total unpaid principal balance of the Mortgage Receivables at the Cut- Off Date, but in any event no longer than seven years after the Closing Date. During the Risk Retention Period, (a) the Seller will retain the EVI, (b) the Seller (or a majority-owned affiliate ) will be entitled to obtain financing to cover the cost of carrying the EVI so long as such financing is on a full recourse basis and (c) there will be limits on the Seller s ability to hedge its risks associated with the ownership of the EVI. Investors in the Notes and Certificates should be aware that the U.S. Risk Retention Requirements impose retention requirements in connection with any offering or sale of asset-backed securities. Accordingly, any future refinancing or repricing of the Notes and Certificates, and any subsequent issuance of additional notes or certificates by the Issuer, that constitutes an offering for U.S. Federal securities law purposes, will be subject to compliance with the U.S. Risk Retention Requirements after giving effect to such refinancing, repricing or subsequent issuance. Legal investment considerations may restrict certain investments in the Notes and Certificates The investment activities of certain investors are subject to investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent any of the Notes and Certificates are legal investments for such potential investor, the Notes and Certificates can be used as collateral for various types of borrowing and (iii) other restrictions apply to such potential investor s purchase or pledge of any Notes and Certificates. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of the Notes under any applicable risk based capital or similar rules. A failure to consult may lead to damages being incurred or a breach of applicable law by the investor. Risk that the ratings of the Notes changes The ratings to be assigned to Rated Notes by the Credit Rating Agencies are based, among other things, on the value and cash flow generating ability of the Mortgage Receivables and other relevant structural features of the transaction, and reflect only the view of each of the Credit Rating Agencies. There is no assurance that any such credit rating will continue for any period of time or that they will not be reviewed, revised, suspended or withdrawn entirely by any of the Credit Rating Agencies if, in any of the Credit Rating Agencies judgement, circumstances so warrant. The Issuer does not have an obligation to maintain the credit ratings assigned to the Rated Notes. Credit ratings may not reflect all risks The ratings assigned to the Rated Notes (including in respect of the Step-up Margins) shall, among other things: (iii) to the holders of the Class A Notes, address the likelihood of full and timely payments of interest, on each Notes Payment Date in accordance with the Conditions; to the holders of the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, address the likelihood of full and ultimate payment of interest (other than any Net WAC Additional Amounts) in relation to the Rated Notes on the Final Maturity Date; and to the holders of the Rated Notes, address the likelihood of full and ultimate payment of principal in relation to the Rated Notes, on or prior to the Final Maturity Date, 69

70 but does not provide any certainty nor guarantee. Any decline in the credit ratings of such Notes or changes in credit rating methodologies may affect the market value of the Notes. Furthermore, the credit ratings may not reflect the potential impact of all rights related to the structure, market, additional factors discussed above or below and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning credit rating organisation if in its judgment, the circumstances (including a reduction in, or withdrawal of the credit rating of the Issuer Account Bank and the Collection Foundation Account Bank) in the future so require. A deterioration of the credit quality of any of the Issuer s counterparties might have an adverse effect on the credit rating of one or more classes of such Notes. Risk related to unsolicited ratings on the Notes Other credit rating agencies that have not been engaged to rate the Notes by the Issuer may issue unsolicited credit ratings on the Notes at any time. Any unsolicited ratings in respect of the Notes may differ from the ratings expected to be assigned by the Credit Rating Agencies and may not be reflected in this Prospectus. Issuance of an unsolicited rating which is lower than the ratings assigned by the Credit Rating Agencies in respect of the Notes may adversely affect the market value and / or the liquidity of the Notes. Risk related to confirmations from Credit Rating Agencies and Credit Rating Agency Confirmations A credit rating is an assessment of credit risk and does not address other matters that may be of relevance to the Noteholder. A confirmation from a Credit Rating Agency regarding any action proposed to be taken by Security Trustee and the Issuer does not, for example, confirm that such action is permitted by the terms of the Transaction Documents or is in the best interests of, or not prejudicial to, the Noteholders. While Noteholders are entitled to have regard to the fact that the Credit Rating Agencies have confirmed that the then current credit ratings of the relevant Class of Notes would not be adversely affected, a confirmation form the relevant Credit Rating Agency does not impose or extend any actual or contingent liability on the Credit Rating Agencies to the Noteholders, the Issuer, the Security Trustee or any other person or create any legal relationship between the Credit Rating Agencies and the Noteholders, the Issuer, the Security Trustee or any other person whether by way of contract or otherwise. Any confirmation from the relevant Credit Rating Agency may or may not be given at the sole discretion of each Credit Rating Agency. It should be noted that, depending for example on the timing of delivery of the request and any information needed to be provided as part of any such request, it may be the case that a Credit Rating Agency cannot provide a confirmation in the time available or at all, and the relevant Credit Rating Agency shall not be responsible for the consequences thereof. Confirmation, if given by the relevant Credit Rating Agency, will be given on the basis of the facts and circumstances prevailing at the relevant time and in the context of cumulative changes to the transaction of which the securities form part since the Closing Date. A confirmation from the relevant Credit Rating Agency represents only a restatement or confirmation of the opinions given as at the Closing Date and cannot be construed as advice for the benefit of any parties to the transaction. Furthermore, it is noted that the defined term Credit Rating Agency Confirmation as used in this Prospectus and the Transaction Documents and which is relied upon by the Security Trustee, does not only refer to the situation that the Security Trustee has received a confirmation from each Credit Rating Agency that the then current ratings of the Notes will not be adversely affected by or withdrawn as a result of the relevant matter (a confirmation), but also includes: 70

71 - if no confirmation is forthcoming from any Credit Rating Agency, a written indication, by whatever means of communication, from such Credit Rating Agency that it does not have any (or any further) comments in respect of the relevant matter (an indication ), or - if no confirmation and no indication is forthcoming from any Credit Rating Agency and such Credit Rating Agency has not communicated that the then current ratings of the Notes will be adversely affected by or withdrawn as a result of the relevant matter or that it has comments in respect of the relevant matter: - a written communication, by whatever means, from such Credit Rating Agency that it has completed its review of the relevant matter and that in the circumstances (x) it does not consider a confirmation required or (y) it is not in line with its policies to provide a confirmation; or - if such Credit Rating Agency has not communicated that it requires more time or information to analyse the relevant matter, evidence that 30 days have passed since such Credit Rating Agency was notified of the relevant matter and that reasonable efforts were made to obtain a confirmation or an indication from such Credit Rating Agency. Thus, Noteholders incur the risk of losses under the Notes when relying solely on a Credit Rating Agency Confirmation, including on a confirmation from each Credit Rating Agency that the then current ratings of the Notes will not be adversely affected by or withdrawn as a result of the relevant matter. The Credit Rating Agencies may change their criteria and methodologies and it may therefore be required that the Transaction Documents be restructured in connection therewith to prevent a downgrade of the credit ratings assigned to the Notes. There is, however, no obligation for any party to the Transaction Documents, including the Issuer or the Security Trustee, to cooperate with or to initiate or propose such a restructuring. A failure to restructure the transaction may lead to a downgrade of the credit ratings assigned to the Notes. Forecasts and estimates This Prospectus contains forecasts and estimates which constitute forward-looking statement. Such statements appear in a number of places in this Prospectus. These forward-looking statements can be identified by the use of forward-looking terminology, such as the words estimates, goals, targets, predicts, forecasts, aims, believes, expects, may, will, continues, intends, plans, should, could or anticipates, or similar terms. These statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results and performance of the Notes and Certificates, the Mortgage Receivables, the Seller or the Dutch residential mortgage loan industry to differ materially from any future results or performance expressed or implied in the forward-looking statements and estimate. These risks, uncertainties and other factors include, among other things: general economic and business conditions in and outside the Netherlands; currency exchange and interest rate fluctuations; government, statutory, regulatory or administrative initiatives affecting the Seller; changes in business strategy, lending practices or customer relationships; and other factors that may be referred to in this Prospectus. Moreover, past financial performance should not be considered a reliable indicator of future performance and prospective purchasers of any of the Notes and Certificates are cautioned that any such statements are not guarantees of performance and involve risks and uncertainties, many of which are beyond the control of the Issuer. Some of the most significant of these risks, uncertainties and other factors are discussed under this section Risk Factors, and you are encouraged to consider those factors carefully prior to making an investment decision. The Arranger, the Lead Manager, the Seller and the Security Trustee have not attempted to verify any such statements, nor do they make any representations, express or implied, with respect to such statement. Without prejudice to any requirements under applicable laws and regulations, the Issuer expressly disclaims any obligation or undertaking to disseminate after the date of this Prospectus any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations 71

72 in them or any change in events, conditions or circumstances on which any such forward-looking statement is based. These forward-looking statements speak only as of the date of this Prospectus. The Issuer, the Arranger and the Lead Manager expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Issuer s, the Arranger s and / or Lead Manager s expectations with regard thereto or any change in events, conditions or circumstances after the date of this Prospectus on which any such statement is based. These statements reflect the Issuer s current views with respect to such matters. Class A Notes may not be recognised as eligible Eurosystem collateral The Class A Notes are intended to be held in a manner which allows Eurosystem eligibility. The Class A Notes will upon issue be deposited with Euroclear or Clearstream, Luxembourg which is a CSD, but this does not necessarily mean that the Class A Notes will be recognised as Eurosystem Eligible Collateral either upon issue or at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria as amended from time to time, which criteria will include the requirement that loan-by-loan information be made available to investors in accordance with the template which is available on the website of the European Central Bank. It has been agreed in the Administration Agreement and the Servicing Agreement, respectively, that the Issuer Administrator or, at the instruction of the Issuer Administrator, the Servicer shall use its best efforts to make such loan-by-loan information available. Should such loan-by-loan information not comply with the European Central Bank s requirements or not be available at such time, the Class A Notes may not be recognised as Eurosystem Eligible Collateral. The other classes of Notes are not intended to be held in a manner which allows Eurosystem eligibility. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on its regulated market on or about the Closing Date. However, there is no assurance that the Notes will be admitted to the official list and trading on the regulated market of the Irish Stock Exchange. If the Class A Notes will not be admitted to listing, they will not be recognised as Eurosystem Eligible Collateral. The Seller and its Affiliates must comply with governmental laws and regulations that are subject to change and involve significant costs Morgan Stanley Principal Funding, Inc. and its affiliates are governed by numerous foreign, federal and state laws and the supervision and examination of various regulatory agencies. In July 2010, Congress passed the Dodd-Frank Act, which has adversely affected and could further impact the financial services industry. The financial services industry has undergone and will continue to undergo further increased regulation, such as additional disclosure and other obligations, restrictions on pricing and enforcement proceedings, as a result of the Dodd-Frank Act, other legislation and the rules and regulations adopted by governmental entities. Compliance with applicable law and regulations may be costly because new processes, forms, controls and additional infrastructure may be required to comply with new requirements and to withstand increased scrutiny. Laws in the financial services industry are designed primarily for the protection of consumers. Any failure to comply with these laws and regulations could result in significant statutory civil and criminal penalties, monetary damages, attorneys fees and costs, possible revocation of licences and damage to reputation, brand and valued customer relationships. Many rules under the Dodd-Frank Act have been implemented by the applicable federal regulatory agencies, but in some cases the applicable rules have not become effective or additional rulemaking required under the Dodd-Frank Act has not been completed. Therefore, the full impact of the Dodd-Frank Act on the financial markets and its participants and on the asset backed securities market in particular will not be known for some time. No assurance can be given that the Dodd-Frank Act and its implementing regulations, or the imposition of additional regulations, including the orderly liquidation authority of the Dodd-Frank Act, will not have a significant adverse impact on the Issuer, the Originator, the Seller or the Servicer, including on the servicing of the Mortgage Receivables, or the price that a subsequent purchaser would be willing to pay for the Notes or Certificates. 72

73 The proposed financial transaction tax (FTT) On 14 February 2013, the European Commission published a proposal for a Directive for a common FTT in Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain. Estonia, however, withdrew from the enhanced cooperation in March 2016 (the FTT Participating Member States). The proposed FTT has a very broad scope and could apply to certain dealings in financial instruments (including secondary market transactions). The FTT could apply to persons both within and outside of the FTT Participating Member States. Generally, it would apply to certain dealings in financial instruments where at least one party is a financial institution, and either at least one party is established or deemed to be established in an FTT Participating Member State or the financial instruments are issued in an FTT Participating Member State. In the ECOFIN meeting of 17 June 2016, the FTT was discussed between the EU Member States. It has been reiterated in this meeting that the FTT Participating Member States envisage introducing an FTT by the socalled enhanced cooperation. The proposed Directive defines how the FTT would be implemented in the FTT Participating Member States. It involves a minimum 0.1 per cent. tax rate for transactions in all types of financial instruments, except for derivatives that would be subject to a minimum 0.01 per cent. tax rate. The Directive requires the unanimous agreement of the FTT Participating Member States, after consultation of the European Parliament. All EU Member States can participate in discussions on the proposal, though only FTT Participating Member States can take part in the vote. The proposed FTT remains subject to negotiation between the FTT Participating Member States. It may therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may decide to participate, and FTT Participating Member States may withdraw. Prospective holders of any of the Notes and Certificates are advised to seek their own professional advice in relation to the FTT. Disclosure requirements CRA Regulation On 6 January 2015, Commission Delegated Regulation 2015/3 (the Regulation 2015/3) on disclosure requirements for the issuer, originator and sponsor of structured finance instruments was published in the Official Journal of the EU. The Regulation 2015/3 will apply from 1 January 2017, with the exception of Article 6(2) of the CRA Regulation, which applies from 26 January 2015 and obliges ESMA to publish on its website at the latest on 1 July 2016 the technical instructions in accordance with which the reporting entity shall submit data files containing the information to be reported starting from 1 January As at the date of this Prospectus, certain aspects of the Regulation 2015/3 remain subject to further clarification. It should be noted, however, that pursuant to the Administration Agreement, the Issuer Administrator has been appointed as the reporting entity in respect of the Notes and Certificates issued by the Issuer for the purposes of Article 8b of the CRA Regulation and the corresponding implementing measures (including the disclosure, reporting and notification requirements under articles 2 to 7 of Regulation 2015/3). On the Signing Date, there remains uncertainty as to what the consequences would be for the Issuer, related third parties and investors resulting from any potential non-compliance by the Issuer with the CRA Regulation upon application of the reporting obligations. Effects of the Volcker Rule on the Issuer 73

74 The Issuer is relying on an exclusion from the definition of investment company under the Investment Company Act other than the exclusions contained in Section 3(c)(1) and Section 3(c)(7). The Issuer was structured so as not to constitute a covered fund for purposes of the regulations adopted under Section 13 of the Bank Holding Company Act of 1956, as amended (commonly known as the Volcker Rule).The Volcker Rule generally prohibits banking entities (which is broadly defined to include U.S. banks and bank holding companies and many non-u.s. banking entities, together with their respective subsidiaries and other affiliates) from engaging in proprietary trading, acquiring or retaining an ownership interest in or sponsoring a covered fund and (iii) entering into certain relationships with such funds. The Volcker Rule became effective on 1 April 2014, but was subject to a conformance period for certain funds which concluded on 21 July Under the Volcker Rule, unless jointly determined otherwise by specified federal regulators, a covered fund does not include an issuer which satisfies all of the elements of the exclusion from the definition of investment company under the Investment Company Act provided by Section 3(c)(5)(C) thereunder. The general effects of the Volcker Rule remain uncertain. Any prospective investor in any of the Notes and Certificates, including a U.S. or foreign bank or a subsidiary or other affiliate thereof, should consult its own legal advisers regarding such matters and other effects of the Volcker Rule. RISK FACTORS REGARDING THE MORTGAGE RECEIVABLES Mortgage Loans comprise of non-conforming mortgage loans The Mortgage Loans will have been underwritten in accordance with the Mortgage Loan Criteria of the Originator to borrowers who do not satisfy the requirements of main stream banks originating mortgage loans in the Netherlands. In particular, the Mortgage Loans may include Mortgage Loans made to Borrowers who may have a bad credit history and may have a negative register with the National Credit Register (BKR; Bureau Krediet Registratie), have no third party verified income statements, (iii) who may have been subject to insolvency proceedings which have been discharged or (iv) Borrowers who are selfemployed. Consequently, the credit risks relating to the Mortgage Receivables may be deemed higher than in the case of any prime mortgage loans originated in the Netherlands. Defaults, delinquencies and bankruptcy filings by Borrowers may rise General economic conditions and other factors (which may not affect property values) have an impact on the ability of Borrowers to repay the Mortgage Loans. Loss of earnings, illness, divorce and other similar factors can lead to an increase in delinquencies and bankruptcy filings by Borrowers, which may result in a reduction in payments by such Borrowers on their Mortgage Loans and could reduce the Issuer s ability to service payments on the Notes and may reduce any distributions on the Certificates. Basis mismatch Since the basis on which the Mortgage Loans accrue interest (being primarily on the basis of Euribor for one month deposits) differs from the Euribor for three month deposits, which is the basis on which the Notes accrue interest, there is the possibility that interest on the Mortgage Loans may not be equal to the interest on the Notes (i.e., a basis mismatch ). This basis mismatch in periods of rising or lowering of interest rates can create a negative impact on the Notes, especially if the corresponding increase (or decrease) between the interest rate on the Mortgage Loans (plus the applicable margin) and the interest rate on the Notes, being the Euribor for three month deposits plus the applicable Margin, is not in the same proportion to each other. Reliance on third parties in relation to the Mortgage Loans The Issuer is party to contracts with a number of other third parties who have agreed to perform services in relation to the Notes and Certificates. In the event that any of the above parties were to fail to perform their obligations under the respective agreements to which they are a party, and / or are removed or if such 74

75 a party resigns without a sufficiently experienced substitute or any substitute being appointed in their place promptly thereafter, collections on the Mortgage Loans and / or payments to Noteholders and Certificateholders may be disrupted and Noteholders and Certificateholders may be adversely affected. Risk related to payments received by the Originator or the Seller prior to notification of the assignment to the Issuer Until notification Borrowers may only validly pay to Originator On 23 April 2008, EMF-NL B.V (EMF-NL) purchased and accepted assignment of the Mortgage Receivables (and the Beneficiary Rights relating to) them from ELQ Portefeuille I B.V. (the Originator), including all ancillary rights (nevenrechten), such as mortgage rights (rechten van hypotheek) and rights of pledge (pandrechten), from the Originator, under a mortgage receivables purchase agreement and a deed of assignment and registration of the deed of assignment with the Dutch tax authorities. As a result, the Mortgage Receivables (and the Beneficiary Rights relating to them) were transferred from the Originator to EMF-NL (Assignment 1). The Borrowers under the Mortgage Loans were not notified of such transfer. On or before the Signing Date, the Seller will purchase and accept assignment of the Mortgage Receivables (and the Beneficiary Rights relating to them), including all ancillary rights (nevenrechten), such as mortgage rights (rechten van hypotheek) and rights of pledge (pandrechten), from EMF-NL, under a mortgage receivables purchase agreement and a notarial deed of assignment, as a result of which the Mortgage Receivables and the Beneficiary Rights relating to them will be transferred from EMF-NL to the Seller (Assignment 2). On the Signing Date, the Seller will sell and, following the acquisition of the Mortgage Receivables and the Beneficiary Rights relating to them from EMF-NL, and, on the Closing Date, the Seller will sell and assign to the Issuer the Mortgage Receivables (and the Beneficiary Rights relating to them) under the Mortgage Receivables Purchase Agreement and a notarial deed of assignment and pledge. Legal title to the Mortgage Receivables will transfer from the Seller to the Issuer on the Closing Date (Assignment 3, and together with Assignment 1 and Assignment 2, the Assignments). The Mortgage Receivables Purchase Agreement will provide that Assignment 1, Assignment 2 and Assignment 3 will not be notified by the Originator, the Seller or, as the case may be, the Issuer, to the Borrowers except that notification of the Assignments may be made upon the occurrence of any of the Assignment Notification Events. See further Section 7 (Portfolio Documentation). Until notification of the Assignments, the Borrowers under such Mortgage Receivables can only validly pay the Originator in order to fully discharge their payment obligation (bevrijdend betalen) in respect thereof. If the Originator has received any such amounts and is declared bankrupt prior to making such payments to the Issuer, the Issuer has no right of any preference in respect of such amounts and thus has a credit risk against the Originator in respect of such amounts. Payments made by Borrowers to the Originator prior to notification of the Assignments, but after bankruptcy in respect of the Originator having been declared, will be part of the Originator s bankruptcy estate. In respect of these payments, the Issuer will be a creditor of the relevant estate (boedelschuldeiser) and will receive payment prior to (unsecured) creditors with ordinary claims, but after preferred creditors of the estate and after deduction of the general bankruptcy costs (algemene faillissementskosten), which may be material. Payments made by Borrowers to the Seller prior to notification of the Assignments, but after bankruptcy in respect of the Seller having been declared, will be part of the Seller s bankruptcy estate. Reference is made to the Risk Factor (Risks relating to the bankruptcy of Morgan Stanley Principal Funding, Inc., as Seller) Borrower payments not part of the Originator s estate the Collection Foundation 75

76 The risks set out in the preceding paragraphs, are mitigated to a certain extent by the following structural features. Each Borrower has given a power of attorney to the Servicer or any sub agent of the Servicer to collect amounts from his account due under the Mortgage Loans by direct debit. Under the Receivables Proceeds Distribution Agreement the Servicer undertakes to direct all amounts of principal and interest to the Collection Foundation Account maintained by the Collection Foundation that is a bankruptcy remote foundation (stichting). The Collection Foundation Account is held with the Collection Foundation Account Bank. As a consequence, the Collection Foundation has a claim against the Collection Foundation Account Bank as foundation accounts provider (or its successor) as the bank where such account is held, in respect of the balances standing to credit of the Collection Foundation Account. The Issuer has been advised that in the event of a bankruptcy of the Originator or the Seller any amounts standing to the credit of the Collection Foundation Account relating to the Mortgage Receivables will not form part of the bankruptcy estate of the Originator or the Seller. The Collection Foundation is set up as a special purpose bankruptcy remote entity. The objectives clause of the Collection Foundation is limited to collecting, managing and distributing amounts received on the Collection Foundation Account to the persons who are entitled to receive such amounts pursuant to the Receivables Proceeds Distribution Agreement. Upon receipt of such amounts, the Collection Foundation (or the Servicer on its behalf) will distribute to the Issuer or, after the delivery of an Enforcement Notice, to the Security Trustee any and all amounts relating to the Mortgage Receivables received by it on the Collection Foundation Account, in accordance with the relevant provisions of the Receivables Proceeds Distribution Agreement. There is a risk that the Seller or the Originator (prior to notification of the assignment) or its liquidator (following bankruptcy or suspension of payments but prior to notification) instructs the Borrowers to pay to another bank account. Any such payments by a Borrower would be valid (bevrijdend). This risk is, however, mitigated by the following. Firstly, the Servicer has under the Receivables Proceeds Distribution Agreement undertaken towards the Issuer and the Security Trustee not to amend the payment instructions and not to redirect cash flows to the Collection Foundation Account in respect of the Mortgage Receivables to another account, without prior approval of the Issuer and the Security Trustee. In addition, Stater Nederland B.V. has undertaken in the Receivables Proceeds Distribution Agreement to disregard any instructions or orders from the Servicer to cause the transfer of amounts in respect of the Mortgage Receivables to be made to another account than the Collection Foundation Account without prior approval of the Issuer and the Security Trustee. Notwithstanding the above, the Originator and the Seller are obliged to pay to the Issuer any amounts which were not paid on the Collection Foundation Account but to the Originator or the Seller directly. Collection Foundation Account Pledge Agreement Under the Collection Foundation Account Pledge Agreement (the Collection Foundation Account Pledge Agreement), the Issuer, among others, will grant a first ranking disclosed right of repledge (herpandrecht) in respect of the Collection Foundation s rights over the Collection Foundation Account in favour of, among others, the Security Trustee, and, by operation of the right of repledge in favour of the Security Trustee, a second ranking disclosed right of pledge by the Collection Foundation in respect of its rights over the Collection Foundation Account in favour of, among others, the Issuer is granted by the Collection Foundation. Such rights of pledge are governed by Dutch law and have been notified to the Collection Foundation Account Bank and the Collection Foundation, respectively. As of the Closing Date, the Collection Foundation is used for several transactions initiated by the Originator or entities related to the Originator. The relevant beneficiaries under the Collection Foundation Account Pledge Agreement, including the Issuer, have agreed in the Collection Foundation Account Pledge Agreement that the relevant security trustees, including the Security Trustee, will manage (beheren) the co-held security rights jointly. 76

77 The Collection Foundation, the Issuer, the Security Trustee and the other beneficiaries and security trustees under the Collection Foundation Account Pledge Agreement have further agreed in the Collection Foundation Account Pledge Agreement that the share within the meaning of section 3:166 of the Dutch Civil Code (aandeel) of the relevant security trustees, including the Security Trustee, in respect of the balance of the Collection Foundation Account is equal to the sum of the amounts standing to the credit of the Collection Foundation Account which relate to the Mortgage Receivables from time to time. In addition, in case of foreclosure of the right of pledge on the Collection Foundation Account, the proceeds will be divided according to each share. It is uncertain whether this arrangement is enforceable in the event that the Security Trustee or any of the other security trustees under the Collection Foundation Account Pledge Agreement should become insolvent. However, the Issuer has been advised that neither the Collection Foundation s nor the Seller s or Originator s insolvency would affect this arrangement. In this respect it is agreed that in case of a breach by a party of its obligations under the abovementioned agreements or if such agreement is dissolved, void, nullified or ineffective for any reason in respect of such party, such party shall compensate the other parties forthwith for any and all loss, costs, claim, damage and expense whatsoever which such party incurs as a result thereof. The Collection Foundation Account Pledge Agreement provides that future issuers (and any security trustees) in securitisation transactions and future vehicles in conduit transactions or similar transactions (and any security trustees relating thereto) initiated by the Originator will also have the benefit of the right of pledge on the balance standing to the credit of the Collection Foundation Account. The rights of the Security Trustee will rank pari passu to the rights of each further security trustee in such securitisation transactions, conduit transactions or similar transactions, and the rights of the Issuer will rank pari passu to the rights of each further issuer in such securitisation transactions, conduit transactions or similar transactions. Set-off by Borrowers may affect the proceeds under the Mortgage Receivables Under Dutch law a debtor has a right of set-off if it has a claim that corresponds to its debt owed to the same counterparty and it is entitled to pay its debt as well as to enforce its claim. Subject to these requirements being met, each Borrower will be entitled to set off amounts due by the Originator to it (if any) with amounts it owes in respect of the Mortgage Receivable originated by the Originator prior to notification of the relevant assignment of the Mortgage Receivable originated by it. As a result of the set-off of amounts due and payable by the Originator to the Borrower with amounts the Borrower owes in respect of the Mortgage Receivable originated by the Originator, the Mortgage Receivable will, partially or fully, be extinguished (gaat teniet). Set-off by Borrowers could thus lead to losses under the Notes and have an adverse impact on the ability to make payments under any of the Notes and Certificates. The Mortgage Conditions applicable to the Mortgage Loans provide that payments by the Borrowers should be made without set-off. Although this clause is intended as a waiver by the Borrowers of their set-off rights against the Originator, under Dutch law it is uncertain whether such waiver will be valid. Should such waiver be invalid and in respect of Mortgage Loans which do not contain a waiver, the Borrowers will have the setoff rights described in this paragraph. Prior to notification of the Assignment, to a Borrower, such Borrower, in respect of a Mortgage Loan originated by the Originator, will have the right to set-off a counterclaim against the Originator, provided that the legal requirements for set-off are met (see above) and further provided that the counterclaim of the Borrower results from the same legal relationship as the relevant Mortgage Receivable or the counterclaim of the Borrower has originated (opgekomen) and became due and payable (opeisbaar) prior to Assignment and notification of it to the relevant Borrower. The question whether a court will come to the conclusion that the relevant Mortgage Receivable and the claim of the Borrower against the Originator result from the same legal relationship will depend on all relevant facts and circumstances involved. But even if these would be held to be different legal relationships, set-off will be possible if the counterclaim of the 77

78 Borrower has originated (opgekomen) and became due and payable (opeisbaar) prior to notification of the Assignment, provided that all other requirements for set-off have been met (see above). After a Borrower has been notified of the Assignment, the Borrower will have the right to set-off a counterclaim against the Originator against the Issuer, provided that the requirements for set-off after notification of an assignment (see the third paragraph) have been satisfied. If notification of the Assignment is made after the bankruptcy or emergency regulations of the Originator having become effective, it is defended in legal literature that the Borrower will, irrespective of the notification of the assignment, continue to have the broader set-off rights afforded to it in the Dutch Bankruptcy Code. Under the Dutch Bankruptcy Code a person which is both debtor and creditor of the bankrupt entity can set off its debt with its claims, if each claim came into existence prior to the moment at which the bankruptcy becomes effective or resulted from transactions with the bankrupt entity concluded prior to the bankruptcy becoming effective. A similar provision applies in case of suspension of payments or emergency regulations. The Mortgage Receivables Purchase Agreement provides that if a Borrower sets off amounts due to it by the Originator against a Mortgage Receivable and, as a consequence thereof, the Issuer does not receive the amount which it is entitled to receive in respect of such Mortgage Receivable, the Seller will pay to the Issuer an amount equal to the difference between the amount which the Issuer would have received in respect of the Mortgage Receivable if no set-off had taken place and the amount actually received by the Issuer in respect of such Mortgage Receivable, provided that the maximum amount that the Issuer can recover from the Seller is capped at EUR 20,000 per Mortgage Receivable, irrespective of the number of (or severity of) breaches of representations and warranties under and in respect of the Mortgage Receivable (and related Mortgage Loan). Risk that the All Moneys Security Rights will not follow the Mortgage Receivables upon assignment to the Issuer The Mortgages and Borrower Pledges qualify as All Moneys Security Rights, meaning that the security rights created pursuant to the mortgage loan documentation, not only secure the loans granted by the Originator to the Borrower for the purpose of acquiring the relevant Mortgaged Asset, but also secures other liabilities and moneys that the Borrower, now or in the future, may owe to the Originator. Under Dutch law, as a rule mortgages and pledges are accessory rights (afhankelijke rechten) and as such automatically follow the receivables they secure. This means that upon assignment of a receivable, the assignee automatically gets the benefit of any security right which secures such receivable, unless the ancillary right by its nature is, or has been construed as, a purely personal right of the assignor or such transfer is prohibited by law. This principle is confirmed by the decision by the Supreme Court (Hoge Raad) of 16 September 1988 (NJ 1989, 10) (the Balkema Case). In this decision, the Supreme Court ruled that the main rule is that a mortgage as an accessory right transfers together with the receivable it secures. The exception to this main rule is when the mortgage was stipulated as a strictly personal right. The Supreme Court held that it is a question of interpreting the relevant clause in the mortgage deed whether the definition of the secured receivable means that it exclusively vests in the original mortgagee as a strictly personal right, in deviation from the main rule. The wording of the relevant mortgage deed constitutes prima facie evidence of whether the intention of the parties was to create the relevant mortgage as a personal right, although it is not inconceivable that evidence to the contrary is brought forward. The mortgage loan documentation contains an explicit provision that a Mortgage or Borrower Pledge will follow the Mortgage Receivable upon assignment to a third party. Such wording is a clear indication of the intention of the parties not to create a personal security right. Consequently, in the absence of specific circumstances evidencing an intention contrary to the intention indicated in the mortgage deeds, based on the interpretation of the Balkema Case referred to above, All Moneys Security Rights will thus also (partially) follow the Mortgage Receivables upon their assignment by the Seller to the Issuer, as an accessory and 78

79 ancillary right upon its assignment and co-owned security rights will come into existence by operation of law. Risk related to jointly-held All Moneys Security Rights by the Originator, the Seller, the Issuer and the Security Trustee After all Mortgage Receivables have transferred to the Issuer and if the All Moneys Security Rights have indeed (partially) followed the Mortgage Receivables upon their assignment, the Security Rights would be co-owned by the Issuer, the Seller and the Originator, as applicable, and would secure both the Mortgage Receivables held by the Issuer (or the Security Trustee, as pledgee) and any other claim and certain risks relating to the enforcement and distribution of foreclosure proceeds apply as discussed below. Ability to enforce If the All Moneys Security Rights are co-owned, the rules applicable to co-ownership (gemeenschap) apply. Under the Mortgage Receivables Purchase Agreement the Seller, the Originator, the Issuer and the Security Trustee will agree that the Issuer and / or the Security Trustee (as applicable) will manage and administer such co-owned rights. Certain acts, including acts concerning the day-to-day management (beheer) of the coowned rights, may under Dutch law be transacted by each of the participants (deelgenoten) in the co-owned rights (without consent of the others). It is, however, uncertain whether the foreclosure of the security rights will be considered as day-to-day management, and, consequently, whether the consent of the Seller, or the Seller s bankruptcy trustee (in case of bankruptcy) or administrator in case of (preliminary) suspension of payments) may be required for such foreclosure. If the Seller and / or Originator has no Other Claims, there is no reason to assume such consent would be withheld. Allocation of foreclosure proceeds The Seller and the Originator will represent and warrant in the Mortgage Receivables Purchase Agreement that on the Cut-Off Date the Seller and the Originator had no Other Claims. If the Seller and the Originator have no Other Claims at the time of foreclosure of the All Moneys Security Rights, the full foreclosure proceeds will de facto be available to satisfy the Mortgage Receivables. In the unlikely event that the Seller and / or Originator should have any Other Claim against the Borrower at the time of foreclosure, the following applies: the Seller, the Originator, the Issuer and / or the Security Trustee (as applicable) will agree in the Mortgage Receivables Purchase Agreement that in case of foreclosure, the share (aandeel) in each co-owned security interest of the Security Trustee and / or the Issuer will be equal to the Outstanding Principal Amount of the Mortgage Receivables, increased with interest and costs, if any, and the Seller s and Originator s share will be equal to the Net Foreclosure Proceeds less the Outstanding Principal Amount in respect of the Mortgage Receivables, increased with interest and costs, if any. It is uncertain whether this arrangement will be enforceable against the Seller and / or Originator or, in case of bankruptcy or (preliminary) suspension of payments, the Seller s and / or Originator s bankruptcy trustee or administrator. The Dutch Civil Code provides for various mandatory rules applying to co-owned rights. Consequently, the arrangements set out in the Mortgage Receivables Purchase Agreement as described in this risk factor may not be enforceable in all respects. Long lease The mortgage rights securing the Mortgage Loans may be vested on a long lease (erfpacht), as further described in the Section 6.2 (Description of Mortgage Loans). A long lease will, among other things, end as a result of expiration of the long lease term (in the case of a lease for a fixed period), or termination of the long lease by the leaseholder or the landowner. The landowner can terminate the long lease if the leaseholder has not paid the remuneration due for a period exceeding two consecutive years or seriously breaches (in ernstige mate tekortschiet) other obligations under the long lease. If the long lease ends, the landowner will have the obligation to compensate the leaseholder. In such event the mortgage right will, by operation of law, 79

80 be replaced by a right of pledge on the claim of the (former) leaseholder on the landowner for such compensation. The amount of the compensation will, among other things, be determined by the conditions of the long lease and may be less than the market value of the long lease. When underwriting a Mortgage Loan to be secured by a mortgage right on a long lease, the Originator has taken into consideration certain conditions, in particular the term of the long lease. Therefore, the Mortgage Conditions used by the Originator provide that the Outstanding Principal Amount of a Mortgage Receivable, including interest, will become immediately due and payable, among other things, if the long lease terminates. Accordingly, certain Mortgage Loans may become due and payable prematurely as a result of early termination of a long lease. In such event there is a risk that the Issuer will upon enforcement receive less than the market value of the long lease, which could lead to losses under the Notes and have an adverse impact on the ability to make payments under any of the Notes and Certificates. Risk that Borrower Insurance Pledges will not be effective All rights of a Borrower under the Insurance Policies have been pledged to the Originator under a Borrower Insurance Pledge. The Issuer has been advised that it is probable that the right to receive payment under the Insurance Policies will be regarded by a Netherlands court as a future right. The pledge of a future right is, under Dutch law, not effective if the pledgor is declared bankrupt, granted a suspension of payments or a debt restructuring scheme pursuant to the Dutch Bankruptcy Code or is subject to emergency regulations, prior to the moment such right comes into existence. This means that it is uncertain whether such pledge will be effective. Accordingly, the Issuer s rights under insurance policies pledged by Borrowers may be subject to limitations under Dutch insolvency law, which may, in turn, lead to losses under the Notes and have an adverse impact on the ability to make payments under any of the Notes and Certificates. Risks relating to Beneficiary Rights under the Insurance Policies It is uncertain whether the Issuer will have the benefit of the Beneficiary Rights. In respect of the Beneficiary Rights of the Originator, under Dutch law it is uncertain whether the Beneficiary Rights have followed the Mortgage Receivables under Assignment 1, and whether they will follow the Mortgage Receivables under Assignment 2 and Assignment 3. To the extent legally possible, the Beneficiary Rights have been assigned by the Originator to EMF-NL prior to the Closing Date under Assignment 1, will be assigned on the Closing Date by EMF-NL to the Seller under Assignment 2 and (iii) will be assigned on the Closing Date by the Seller to the Issuer under Assignment 3. Subsequently, the Issuer will grant a pledge over the Beneficiary Rights to the Security Trustee. The assignment and pledge of the Beneficiary Rights will only be completed upon notification to the Insurance Company, which is not expected to occur prior to the occurrence of an Assignment Notification Event. However, the Issuer has been advised that it is uncertain whether these assignments and pledge will be effective. For the situation that the transfers of the Beneficiary Rights are ineffective, the Issuer and the Security Trustee will enter into the Beneficiary Waiver Agreement with the Seller and the Originator under which the Originator, without prejudice to the rights of the Issuer as assignee and the rights of the Security Trustee as pledgee and subject to the condition precedent of the occurrence of an Assignment Notification Event, waives its right as beneficiary under the Insurance Policies and appoints as first beneficiary the Issuer subject to the dissolving condition (ontbindende voorwaarde) of a Pledge Notification Event and the Security Trustee under the condition precedent (opschortende voorwaarde) of the occurrence of a Pledge Notification Event. It is, however, uncertain whether such waiver and unlikely that such appointment will be effective. In the event that such waiver and appointment are not effective in respect of the Insurance Policies, the Seller and the Originator will undertake that it will use its best efforts upon the occurrence of an Assignment Notification Event to terminate the appointment of the Originator as beneficiary under the 80

81 Insurance Policies and to appoint the Issuer or the Security Trustee, as the case may be, as first beneficiary under the Insurance Policies. In the event that a Borrower Insurance Proceeds Instruction has been given, each of the Seller and the Originator will in the Beneficiary Waiver Agreement undertake to use its best efforts following an Assignment Notification Event to withdraw the Borrower Insurance Proceeds Instruction in favour of the Originator and to issue such instruction in favour of the Issuer subject to the dissolving condition (ontbindende voorwaarde) of a Pledge Notification Event and the Security Trustee under the condition precedent (opschortende voorwaarde) of the occurrence of a Pledge Notification Event. The termination and appointment of a beneficiary under the Insurance Policies and the withdrawal and the issue of the Borrower Insurance Proceeds Instruction will require the co-operation of all relevant parties involved. It is uncertain whether such co-operation will be forthcoming. If the Issuer or the Security Trustee, as the case may be, has not become beneficiary of the Insurance Policies or receiver of the final payment on the basis of the Borrower Insurance Proceeds Instruction, the assignment and pledge of the Beneficiary Rights is not effective and (iii) the waiver of the Beneficiary Rights is not effective, the Originator will be entitled to any proceeds under the Insurance Policies or another beneficiary will be entitled to such proceeds. If the proceeds are paid to the Originator, it will under the Mortgage Receivables Purchase Agreement be obliged to pay the amount involved to the Issuer or the Security Trustee, as the case may be. If the proceeds are paid to the Originator and the Originator does not pay such amount to the Issuer or the Security Trustee, as the case may be, e.g. in case of bankruptcy of the Originator, or if the proceeds are paid to another beneficiary instead of the Issuer or the Security Trustee, as the case may be, this may result in the amount paid under the Insurance Policies not being applied in reduction of the Mortgage Receivables. This may lead to the Borrower invoking set-off or defences against the Issuer or, as the case may be, the Security Trustee for the amounts so received by the Originator or another beneficiary, as the case may be. Mortgage Loan and Mortgage Receivable representations and warranties of the Seller are limited; no repurchase obligation and consequences for breach are limited in recourse to the Seller The representations and warranties made by the Seller are described in Section Representations and Warranties in this Prospectus. The representations and warranties of the Seller with respect to the Mortgage Loans and Mortgage Receivables will be made as of the Cut-Off Date and, in many cases, are subject to important exceptions, qualifications and other limitations, including being subject to knowledge qualifications and materiality, including, contractual standards of materiality that are different from those generally applicable to disclosures to purchasers of securities. In addition, these representations and warranties are included principally for the purpose of allocating risk among the parties to those agreements rather than to establish matters of fact. Accordingly, these representations and warranties should not be read as characterisations of the current state of facts, but instead should be read in light of the limitations and purposes discussed above and in conjunction with the information provided elsewhere in this Prospectus. The representations and warranties cover a number of potential defects with respect to each Mortgage Receivable (and related Mortgage Loan), but may not cover every potential defect which may result in a Realised Loss. No remedy for breach of Mortgage Loan or Mortgage Receivable representations or warranties is available, other than payment of an indemnity by the Seller to the Issuer in an amount not more than EUR 20,000 under each Mortgage Receivable, irrespective of the number of (or the severity of) breaches of representations and warranties under and in respect of such Mortgage Receivable (and related Mortgage Loan). The Seller will be under no obligation to repurchase and accept reassignment of any Mortgage Receivable (and the Beneficiary Rights relating to such Mortgage Receivable) under any circumstance, including, if any of the representations and warranties given by the Seller in respect of the Mortgage Loans and the Mortgage Receivables, are untrue or incorrect in any respect. As a result of the qualifications and other limitations (including, financial limitations, and that the Seller is under no obligation to repurchase any Mortgage Receivable (and related Mortgage Loan) in relation to 81

82 which the Seller is in breach of any representation and warranty) in relation to the representations and warranties of the Seller mentioned above, the Issuer may not be able to claim or claim the full amount of any loss suffered under the indemnity if any representation or warranty in relation to any Mortgage Receivable (and related Mortgage Loan) is breached and the Issuer has suffered any loss (financial or otherwise) as a result of such breach. This may have an adverse effect on the ability of the Issuer to make payments under the Notes and Certificates. Also, see No investigations in relation to the Mortgage Loans and the Mortgaged Assets in Section 2 (Risk Factors). Risk of set-off and defences by Borrowers in case of insolvency of Insurance Companies Under the Life Mortgage Loans, the Originator has the benefit of rights under the Insurance Policies. Under the Insurance Policies the Borrowers pay premium consisting of a risk element and a savings or investment element. The intention of the Insurance Policies is that at maturity of the relevant Mortgage Loan, the proceeds of the savings or investments can be used to repay the relevant Mortgage Loan, whether in full or in part. If any of the Insurance Companies is no longer able to meet its obligations under the Insurance Policies, for example as a result of bankruptcy or having become subject to emergency regulations, this could result in the amounts payable under the Insurance Policies either not, or only partly, being available for application in reduction of the relevant Mortgage Receivables. This may lead to the Borrowers trying to invoke set-off rights and defences which may have the result that the Mortgage Receivables will be, fully or partially, extinguished (teniet gaan) or cannot be recovered for other reasons, which could lead to losses under the Notes and have an adverse impact on the ability to make payments under any of the Notes and Certificates. As set out in Risk that set-off by Borrowers may affect the proceeds under the Mortgage Receivables above, the Borrowers have in the Mortgage Conditions, waived their set-off rights, but it is uncertain whether such waiver is effective. This provision provides arguments for a defence against Borrowers invoking set-off rights or other defences (see below), but it is uncertain whether this provision in the Mortgage Conditions will be effective. If the set-off rights of the Borrowers have not been validly waived or the conditions applicable to the Mortgage Loans do not contain a waiver of set-off rights, the Borrowers will, in order to invoke a right of set-off, need to comply with the applicable legal requirements for set-off. One of these requirements is that the Borrower should have a claim, which corresponds to his debt to the same counterparty. Furthermore, the Borrowers should have a counterclaim that is enforceable. If the relevant Insurance Company is declared bankrupt or has become subject to emergency regulations, the Borrower will have the right unilaterally to terminate the Insurance Policy and to receive a commutation payment (afkoopsom). These rights are subject to the Borrower Insurance Pledge. It could be argued that the Borrower on this basis will not be entitled to invoke a right of set-off for the commutation payment, against the Originator. However, the Borrower may, as an alternative to the right to terminate the Insurance Policies, possibly rescind the Insurance Policy and may invoke a right of set-off against the Originator or, as the case may be, the Issuer for its claim for restitution of premiums paid and / or supplementary damages. It is uncertain whether such claim is subject to the Borrower Insurance Pledge. If not, the Borrower Insurance Pledge would not obstruct a right of set-off in respect of such claim by the Borrowers. Even if the Borrowers cannot invoke a right of set-off, they may invoke defences against the Originator, the Seller, the Issuer and / or the Security Trustee, as the case may be. The Borrowers will naturally have all defences afforded by Dutch law to debtors in general. A specific defence one could think of would be based upon interpretation of the Mortgage Conditions and the promotional materials relating to the Mortgage Loans. Borrowers could argue that the Mortgage Loans and the Insurance Policies are to be regarded as one inter-related legal relationship and could on this basis claim a right of annulment or rescission of the Mortgage Loans or possibly suspension of their obligations thereunder. They could also argue that it was the intention of the Borrower, the Originator and the relevant Insurance Company, at least they could rightfully 82

83 interpret the Mortgage Conditions and the promotional materials in such a manner, that the Mortgage Receivable would be (fully or partially) repaid by means of the proceeds of the relevant Insurance Policy and that, failing such proceeds being so applied, the Borrower is not obliged to repay the (corresponding) part of the Mortgage Receivable. Also, a defence could be based upon principles of reasonableness and fairness (redelijkheid en billijkheid) in general, i.e. that it is contrary to principles of reasonableness and fairness for the Borrower to be obliged to repay the Mortgage Receivable to the extent that he has failed to receive the proceeds of the Insurance Policy. The Borrowers could also base a defence on error (dwaling), i.e. that the Mortgage Loans and the Insurance Policy were entered into as a result of error. If this defence would be successful, this could lead to annulment of the Mortgage Loan, which would have the result that the Issuer no longer holds the relevant Mortgage Receivable. Life Mortgage Loans to which a Life Insurance Policy taken out with an Insurance Company is connected In respect of the risk of such set-off or defences being successful, as described above, if, in case of bankruptcy or emergency regulations of any of the Insurance Companies, the Borrowers/insured will not be able to recover their claims under their Life Insurance Policies, the Issuer has been advised that, in view of the preceding paragraphs and the representation by the Seller (as far as the Seller is aware) that with respect to Life Mortgage Loans a Borrower Insurance Pledge is granted on the rights under such policy in favour of the Originator, the Life Mortgage Loan and the Life Insurance Policy are in the Originator's or the Insurance Company s promotional materials not offered as one combined mortgage and life insurance product or under one name and (iii) the Borrower is not obliged to enter into the Life Insurance Policy with an Insurance Company which is a group company of the Originator, it is unlikely that a court would honour set-off or defences of the Borrowers, as described above, if the Insurance Company is not a group company of the Originator or the Seller within the meaning of Article 2:24b of the Dutch Civil Code. Risk related to the value of investments under Life Insurance Policies The value of investments made under one of the Insurance Companies in connection with the Life Insurance Policies may not be sufficient for the Borrower to fully redeem the related Mortgage Receivables at its maturity. Risks related to offering of Life Mortgage Loans Apart from the general obligation of contracting parties to provide information, there are several provisions of Dutch law applicable to offerors of financial products, such as Life Mortgage Loans. In addition, several codes of conduct apply on a voluntary basis. On the basis of these provisions offerors of these products (and intermediaries) have a duty, among other things, to provide the customers with accurate, complete and nonmisleading information about the product, the costs and the risks involved. These requirements have become more strict over time. A breach of these requirements may lead to a claim for damages from the customer on the basis of breach of contract or tort or the relevant contract may be dissolved (ontbonden) or nullified (vernietigd) or a Borrower may claim set-off or defences against the Originator or the Issuer (or the Security Trustee). The merits of such claims will, to a large extent, depend on the manner in which the product was marketed and the promotional material provided to the Borrower. Depending on the relationship between the offeror and any intermediary involved in the marketing and sale of the product, the offeror may be liable for actions of the intermediaries which have led to a claim. The risk of such claims being made increases, if the value of investments made under Life Insurance Policies is not sufficient to redeem the relevant Mortgage Loans. Since 2006, an issue has arisen in the Netherlands regarding the costs of investment insurance policies (beleggingsverzekeringen), such as the Life Insurance Policies. It is generally alleged that the costs of these products are disproportionally high, that in some cases a legal basis for such costs is lacking and that the information provided to the insured regarding these costs has not been transparent. On this topic there have been several reports, including reports from the AFM, a letter from the Minister of Finance to 83

84 Parliament and (iii) a recommendation, at the request of the Minister of Finance, by the Financial Services Ombudsman to insurers to compensate customers of investment insurance policies for costs exceeding a certain level. Furthermore, there have been press articles stating that individual law suits and class actions may be, and have been, started against individual insurers and that certain individual insurers have reached agreement with claimant organisations on compensation of its customers for the costs of investment insurance policies entered into with the relevant insurer. The discussion on the costs of the investment insurance policies is currently still continuing, since consumer tv-shows and no-win, no fee legal advisors argue that the agreements reached with claimant organisations do not offer adequate compensation. Rulings of courts and the Complaint Institute for Financial Services (Klachteninstituut Financiële Dienstverlening) have been published, some of which are still subject to appeal, which were generally favourable for the insured. If Life Insurance Policies related to the Mortgage Loans would for the reasons described in this paragraph be dissolved or nullified, this will affect the collateral granted to secure these Mortgage Loans (the Borrower Insurance Pledges and the Beneficiary Rights would cease to exist). The Issuer has been advised that in such case the Mortgage Loans connected thereto can possibly also be dissolved or nullified, but that this will depend on the particular circumstances involved. Even if the Mortgage Loan is not affected, the Borrower/insured may invoke set-off or other defences against the Issuer. The analysis in that situation is similar to the situation in case of insolvency of the insurer (see Risk of set-off and defences by Borrowers in case of insolvency of Insurance Companies), except if the Originator is liable itself, whether jointly with the insurer or separately, against the Borrower/insured. In this situation, which may depend on the involvement of the Originator in the marketing and sale of the insurance policy, set-off or defences against the Issuer may be invoked, which will probably only become relevant if the insurer and / or the Originator will not indemnify the Borrower. Any such set-off or defences may lead to losses under the Notes and have an adverse impact on the ability to make payments under any of the Notes and Certificates. Risk that interest rate reset rights will not follow Mortgage Receivables The Issuer has been advised that it is reasonable to argue that the right to reset the Mortgage Interest Rate should be considered as an ancillary right and follows the Mortgage Receivables upon their sale and assignment to the Issuer and the pledge to the Security Trustee, but that in the absence of case law or legal literature this is not certain. To the extent the interest rate reset right passes upon the sale and assignment of the Mortgage Receivables to the Issuer or upon the pledge of the Mortgage Receivables to the Security Trustee, such assignee or pledgee will be bound by the contractual provisions relating to the reset of interest rates. If the interest reset right remains with the Seller and / or Originator, as applicable, the co-operation of the trustee (in bankruptcy) or administrator (in emergency regulations) would be required to reset the interest rates. Payments on the Mortgage Receivables are subject to credit, liquidity and interest rate risks Payments on the Mortgage Receivables are subject to credit, liquidity and interest rate risks, including, the risk of negative interest rates applying to the Mortgage Receivables. This may be due to, among other things, market interest rates, general economic conditions, the financial standing of Borrowers and similar factors. Other factors such as loss of earnings or liquidity, illness, divorce and other similar factors may lead to an increase in delinquencies and bankruptcy filings by Borrowers and could ultimately have an adverse impact on the ability of Borrowers to repay their Mortgage Receivables. The ultimate effect of the credit, liquidity and interest rate risks described in this risk factor could lead to delayed and / or reduced amounts received by the Issuer which as a result could lead to delayed and / or reduced payments on any of the Notes and Certificates and / or the increase or decrease of the rate of repayment or payment of such Notes and Certificates, as applicable. 84

85 No investigations in relation to the Mortgage Loans and the Mortgaged Assets None of the Issuer, the Security Trustee, the Arranger and the Lead Manager or any other person has undertaken or will undertake an independent investigation, searches or other actions to verify the statements of the Seller or the Originator concerning itself, the Mortgage Loans, the Mortgage Receivables and the Mortgaged Assets. The Issuer and the Security Trustee will rely solely on representations and warranties given by the Seller in respect thereof and in respect of itself. Under the Mortgage Receivables Purchase Agreement, the Seller will undertake to indemnify the Issuer in an amount not more than EUR 20,000 under each Mortgage Receivable, irrespective of the number of (or severity of) breaches of representations and warranties under and in respect of such Mortgage Receivable (and related Mortgage Loan), for any amount not received by the Issuer as a result of any of the representations and warranties given by the Seller in respect of such Mortgage Receivable (and the related Mortgage Loan) (including, the representation and warranty that the Mortgage Loan or, as the case may be, the relevant Mortgage Receivable meets the Mortgage Loan Criteria), is untrue or incorrect in any material respect. The Seller will be under no obligation to repurchase and accept reassignment of any Mortgage Receivable (and the Beneficiary Rights relating to such Mortgage Receivable) under any circumstance, including, if any of the representations and warranties given by the Seller in respect of the Mortgage Loans and the Mortgage Receivables, are untrue or incorrect in any respect. If any of the Mortgage Loans and the Mortgage Receivables does not comply with the representations and warranties made by the Seller on the Closing Date and on any Notes Payment Date, and the Seller does not indemnify the Issuer as undertaken in the Mortgage Receivables Purchase Agreement or such indemnification is insufficient to cover any costs, fees, expenses, damages or other losses incurred by the Issuer, this may have an adverse effect on the ability of the Issuer to make payments under any of the Notes and Certificates. Representations and warranties on Mortgage Loans and Mortgage Receivables, and limited due diligence on Mortgage Receivables The Seller is not the originator of the Mortgage Loans comprised in the Mortgage Receivables and related Beneficiary Rights and the Seller will, on the Closing Date, purchase and accept assignment of the Mortgage Receivables (and the Beneficiary Rights relating to them) from EMF-NL. No assurance can be given that the Mortgage Loan Criteria were applied at the time of origination of the Mortgage Loans or that different criteria were not applied. Additionally, the Seller does not have direct knowledge as to whether certain representations and warranties relating to the Mortgage Loans and the Mortgage Receivables (including the representations and warranties which relate to the origination of the Mortgage Loans), are correct or not. Accordingly, since the Seller does not have direct knowledge as to, among other things, matters relating to the actual origination of the Mortgage Loans, although the Seller and the Lead Manager have conducted limited due diligence on certain of the relevant Mortgage Loans, certain representations and warranties relating to, among other things, the origination process, are necessarily qualified by reference to the awareness of the Seller, and further, certain representations and warranties cannot be independently verified by the Seller. As such, it is practically difficult and in some cases not possible for the Seller to detect a breach of certain representations or warranties in respect of the Mortgage Receivables sold by it to the Issuer to the extent that the same relates to a matter outside of the immediate knowledge of the Seller. If any of the Mortgage Loans and the Mortgage Receivables does not comply with the representations and warranties made by the Seller on the Closing Date and on any Notes Payment Date, and the Seller does not indemnify the Issuer as undertaken in the Mortgage Receivables Purchase Agreement or such indemnification (which is limited to an amount of not more than EUR 20,000 under each Mortgage 85

86 Receivable, irrespective of the number of (or severity of) breaches of representations and warranties under and in respect of such Mortgage Receivable (and related Mortgage Loan)) is insufficient to cover any cash flow not received by the Issuer, this may have an adverse effect on the ability of the Issuer to make payments under any of the Notes and Certificates. Risks of losses associated with declining values of Mortgaged Assets The security for the Notes and Certificates created pursuant to the Issuer Mortgage Receivables Pledge Agreement may be affected by, among other things, a decline in the value of the Mortgaged Assets. The value of the Mortgaged Assets is exposed to decreases in real estate prices, arising for instance from downturns in the economy generally, oversupply of properties in the market, and changes in tax regulations related to housing (such as the decrease in deductibility of interest on mortgage payments). Furthermore, the value of the Mortgaged Assets is exposed to destruction and damage resulting from floods and other natural and man-made disasters. No assurance can be given that values of the Mortgaged Assets have remained or will remain at the level at which they were on the date of origination of the related Mortgage Loans. A decline in value may result in losses to the Noteholders and have an adverse impact on the ability to make payments under any of the Notes and Certificates, if the relevant security rights on the Mortgaged Assets are required to be enforced. Neither the Seller nor the Originator will be liable for any losses incurred by the Issuer in connection with the Mortgage Receivables. Risks that the foreclosure proceeds will be insufficient As of the Provisional Pool Date, the Mortgage Loans have a Current Loan to Indexed Market Value Ratio and Current Loan to Original Market Value Ratio of up to (and including) per cent. and , respectively. The appraisal foreclosure value (executiewaarde) of the property on which a Mortgage is vested is normally lower than the market value (vrije verkoopwaarde) of the relevant mortgaged property. There can be no assurance that, on enforcement, all amounts owed by a Borrower under a Mortgage Loan can be recovered from the proceeds of the foreclosure on the relevant Mortgaged Asset or that the proceeds upon foreclosure will be at least equal to the Original Foreclosure Value or the Indexed Foreclosure Value of such Mortgaged Asset. See further Section 6.2 (Description of Mortgage Loans). The higher the Original Loan to Original Foreclosure Value Ratio or the Current Loan to Indexed Foreclosure Value Ratio is, the higher the possibility that this risk will materialise. Materialisation of this risk may lead to losses under the Notes and have an adverse impact on the ability to make payments under any of the Notes and Certificates. Accordingly, there is a risk that, on the enforcement of security over the relevant property not all amounts owing by a Borrower under a Mortgage Loan can be recovered from the proceeds of the foreclosure of the related property together with any proceeds of the enforcement of any other security for the Mortgage Loan. If there is a failure to recover such amounts, this would result in a Realised Loss which may lead to losses under the Notes and have an adverse impact on the ability to make payments under any of the Notes and Certificates. Changes to tax treatment of interest may impose various risks The Dutch tax system allows borrowers to deduct, subject to certain limitations, mortgage interest payments for owner-occupied residences from their taxable income. The period allowed for deductibility is restricted to a term of 30 years and it only applies to mortgage loans in relation to owner occupied properties. Interest in relation to any equity extractions, after a refinancing or otherwise, is not deductible. Since 2004, the tax deductibility of mortgage interest payments has been restricted under the so-called additional borrowing regulation (Bijleenregeling). On the basis of this regulation, if a home owner acquires a new home and realizes a surplus value on the sale of his old home in respect of which interest payments were deducted from taxable income, the interest deductibility is limited to the interest that relates to an amount equal to the purchase price of the new home less the net surplus value realized on the sale of the old home. Special rules apply to moving home owners that do not (immediately) sell their previous home. 86

87 For mortgage loans originated since 1 January 2013, subject to certain grandfathering rules in case on that date a purchase or construction agreement had been entered into but no legal transfer had taken place yet, interest deductibility in respect of newly originated mortgage loans will only be available in respect of mortgage loans which amortize over 30 years or less and are repaid on at least an annuity basis. Finally, an increasing rate of deemed income a property generates (huurwaardeforfait) implies a reducing net tax benefit as a result of interest deductions. In addition to these changes further restrictions on the interest deductibility have entered into force as of 1 January The maximum tax rate against which the mortgage interest may be deducted will be gradually reduced as of 1 January 2014 with 0.5 per cent. per year, down to 38 per cent. in The maximum tax rate against which the mortgage interest may be deducted in 2017 is 50 per cent. (i.e. 50,5 per cent. in 2016). These changes and any other or further changes in the tax treatment could ultimately have an adverse impact on the ability of Borrowers to pay interest and principal on their Mortgage Loans. In addition, changes in tax treatment may lead to different prepayment behaviour by Borrowers on their Mortgage Loans resulting in higher or lower prepayment rates of such Mortgage Loans. Finally, changes in tax treatment may have an adverse effect on the value of the Mortgaged Assets, see Risks of losses associated with declining values of Mortgaged Assets. The deductibility of mortgage interest remains the subject of political debate in the Netherlands and it remains uncertain if, to what extent and how long such deductibility remains in force. Underwriting criteria and procedures may not identify or appropriately assess repayment risks Subject to certain qualifications, the Seller has represented that, when originating Mortgage Loans, the Originator did so in accordance with underwriting criteria and procedures it has established. The underwriting criteria and procedures may not have identified or appropriately assessed the risk that the interest and principal payments due on a Mortgage Loan will be repaid when due, or at all, or whether the value of the Mortgaged Asset will be sufficient to otherwise provide for recovery of such amounts. To the extent exceptions were made to the Originator s underwriting criteria and procedures in originating a Mortgage Loan, those exceptions may increase the risk that principal and interest amounts may not be received or recovered and compensating factors, if any, which may have been the premise for making an exception to the underwriting criteria and procedures may not in fact compensate for any additional risk. Valuations, risks of losses associated with declining property values and the effect on the housing market owing to weakening economic conditions Valuations commissioned as part of the origination of Mortgage Loans, represent the analysis and opinion of the appraiser performing the valuation at the time the valuation is prepared and are not guarantees of, and may not be indicative of, present or future value. There can be no assurance that another person would have arrived at the same valuation, even if such person used the same general approach to and same method of valuing the property. The security for the Notes and Certificates created under the Pledge Agreements may be affected by, among other things, a decline in the value of those properties subject to the Mortgages securing the Mortgage Receivables and investments under the Insurance Policies. No assurance can be given that values of those properties have remained or will remain at the level at which they were on the date of origination of the related Mortgage Loans. In addition, a forced sale of those properties may, compared to a private sale, result in a lower value of such properties. A decline in value may result in losses to the Noteholders and have an adverse impact on the ability to make payments under any of the Notes and Certificates, if such security is required to be enforced. To the extent that specific geographic regions within the Netherlands have experienced or may experience in the future weaker economic conditions and housing markets than other regions, a concentration of the loans 87

88 in such a region could exacerbate certain risks relating to the Mortgage Loans. These circumstances could affect receipts on the Mortgage Loans and ultimately result in losses on the Notes and have an adverse impact on the ability to make payments under any of the Notes and Certificates. See further Sections 6.2 (Description of Mortgage Loans) and 6.4 (Dutch Residential Mortgage Market). 88

89 3. PRINCIPAL PARTIES 3.1 Issuer Delft 2017 B.V. was incorporated as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) under Dutch law on 9 August The corporate seat (statutaire zetel) of the Issuer is in Amsterdam, the Netherlands, and it is registered with the Commercial Register of the Chamber of Commerce under number The telephone number of the Issuer is The Issuer is a special purpose vehicle and its objectives are limited to: (iii) (iv) (v) (vi) (vii) (viii) to purchase, acquire, deal, trade, hold, manage, dispose or otherwise enter into arrangements, from time to time, which constitute financial assets or claims (vorderingen op naam) and any contractual interest in, or any contractual right in, any financial asset or claim, and which shall include, any receivables, loans, shares, bonds, notes, certificates or paper evidencing any kind of indebtedness, documentary (or electronic) intangibles, payment intangibles, securities of any nature, or any other asset or claim of a similar nature; to exercise any rights attached to any asset or claim specified in above; to raise or borrow any money and create any indebtedness, including, the creation and issue of notes, bonds, securities, commercial paper, credit linked securities and any other type of asset backed securities and borrowing money under any lending arrangement of contract, debentures, acknowledgements or certificates of debt, any negotiable or transferable instrument; to grant or create any security over any or all of the company s assets, property, rights, claims and benefits, to secure the payment of any indebtedness or the performance of any contract or obligation of itself, including, securing any obligations of the company pursuant to any guarantee, indemnity, letter of credit or, without any limitation, any other form of economic assurance or support; to grant any guarantee, indemnity, letter of credit or, without any limitation, enter into any other form of economic assurance or support of any kind for the benefit of itself or any other person or legal entity; to enter into in any swaps, derivatives, currency and interest rate hedging transactions and any other financial or other transactions of any nature, including any transaction for the purpose of avoiding, reducing, minimising, hedging against or otherwise managing the risk of any loss, cost, expense or liability arising, or which may arise, directly or indirectly against any risk or factor affecting the company s undertaking and business (including, any change in any interest or currency rate or in the price or in value of any asset, claim or liability); to invest and to lend (by any means) any assets of the company, including, lend, or extend to credit to, any person or legal entity, and to hold, manage and deal with, any such investment, loan or any lending relationship; and to enter into any agreement, document any instrument in respect of, or in connection with, any of the foregoing and to exercise rights and to comply with its obligations under any such agreement, document, or instrument. The Issuer has an issued share capital of EUR 100 which is fully paid-up. The share capital of the Issuer is held by Stichting Delft See further Section 3.2 (Shareholder). 89

90 Statement by managing director of the Issuer Since its incorporation there has been no material adverse change in the financial position or prospects of the Issuer and the Issuer has not commenced operations, no profits and losses have been made or incurred and it has not declared or paid any dividends nor made any distributions, save for the activities related to its establishment and the securitisation transaction described in this Prospectus nor prepared any financial statements. There are no legal, arbitration or governmental proceedings which may have, or have had, significant effects on the Issuer s financial position or profitability nor, so far as the Issuer is aware, are any such proceedings pending or threatened against the Issuer. The Issuer has the corporate power and capacity to issue the Notes and Certificates, to acquire the Mortgage Receivables and to enter into and perform its obligations under the Transaction Documents. The sole managing director of the Issuer is Intertrust Management B.V. The managing directors of Intertrust Management B.V. are E.M. van Ankeren, C.W. Streefkerk, P. de Langen, D.J.C. Niezing and A.R. van der Veen. The managing directors of Intertrust Management B.V. have chosen to be domiciled at the office address of Intertrust Management B.V., being Prins Bernhardplein 200, 1097 JB Amsterdam, the Netherlands. Intertrust Management B.V. is also the Shareholder Director. The sole shareholder of Intertrust Management B.V. is Intertrust (Netherlands) B.V. The objectives of Intertrust Management B.V. are to advise on and mediate with respect to financial and related transactions, perform trust company services, and (iii) conduct the management of legal entities. The Issuer Director will enter into the Issuer Management Agreement with the Issuer and the Security Trustee. In the Issuer Management Agreement, the Issuer Director will agree and undertake, among other things, that it shall manage the affairs of the Issuer in accordance with proper and prudent Dutch business practice and in accordance with the requirements of Dutch law and Dutch accounting practice with the same care that it exercises or would exercise in connection with the administration of similar matters held for its own account or for the account of third parties and refrain from any action detrimental to any of the Issuer s rights and obligations under the Transaction Documents. In addition, the Issuer Director will agree in the Issuer Management Agreement that it shall not agree to any modification of any agreement, including, the Transaction Documents, or enter into any agreement, other than in accordance with the Trust Deed and the other Transaction Documents. The Issuer Management Agreement may be terminated by the Issuer (with the consent of the Security Trustee) or the Security Trustee upon the occurrence of certain termination events, including, a default by the Issuer Director (unless remedied within the applicable grace period), dissolution and liquidation of the Issuer Director or the Issuer Director being declared bankrupt or granted a suspension of payments, provided that the Credit Rating Agencies are notified of such default and after consultation with the Secured Creditors, other than the Noteholders and Certificateholders. Furthermore, the Issuer Management Agreement can be terminated by the Issuer Director or the Security Trustee at the end of each calendar year upon 90 days prior written notice, provided that a Credit Rating Agency Confirmation in respect of each Credit Rating Agency is available in respect of such termination. The Issuer Director shall resign upon the termination of the Issuer Management Agreement, provided that such resignation shall only be effective if an upon a new director reasonably acceptable to the Security Trustee being appointed and a Credit Rating Agency Confirmation in respect of each Credit Rating Agency is obtained in respect of such appointment. There are no potential conflicts of interest between any duties of the Issuer Director to the Issuer and any private interests of the Issuer Director, or any other duties of the Issuer Director or any duties of its managing directors. 90

91 The financial year of the Issuer coincides with the calendar year. The first financial year will end on 31 December Capitalisation The following table shows the capitalisation of the Issuer as of the Closing Date as adjusted to give effect to the issue of the Notes and Certificates: Share Capital Issued Share Capital EUR 100 Borrowings Class A Notes EUR 98,946,000 Class B Notes EUR 19,010,000 Class C Notes EUR 7,401,000 Class D Notes EUR 7,401,000 Class E Notes EUR 9,038,000 Class Z Notes EUR 14,024,000 R1 Certificates EUR zero R2 Certificates EUR zero 91

92 3.2 Shareholder Stichting Delft 2017 was incorporated as a foundation (stichting) under Dutch law on 9 August The statutory seat (statutaire zetel) of the Shareholder is in Amsterdam, the Netherlands, and it is registered with the Commercial Register of the Chamber of Commerce under number The Shareholder is a special purpose vehicle and its objectives are limited to: (iii) (iv) (v) to manage and administer shares in the share capital of the Issuer; to exercise any and all rights attached to any shares in the share capital of the Issuer; to dispose of any shares in the share capital of the Company; to enter into agreements by which it guarantees or agrees to bind itself as security for a debt of a third party, including, to pledge shares in the share capital of the Issuer; and to manage the Issuer and to take any action in respect of, in relation to and / or which may be conducive to, the management of the Issuer and the Issuer taking any action in accordance with any of the Issuer s objects. The sole managing director of the Shareholder is Intertrust Management B.V.. Intertrust Management B.V. is also Issuer Director. The Shareholder Director will enter into the Shareholder Management Agreement with the Shareholder. Under the Shareholder Management Agreement, the Shareholder Director will agree and undertake to, among other things, manage the affairs of the Shareholder in accordance with proper and prudent Dutch business practice and in accordance with the requirements of Dutch law and Dutch accounting practices, and refrain from any action detrimental to the Issuer s ability to meet its obligations under any of the Transaction Documents. 92

93 3.3 Security Trustee Stichting Security Trustee Delft 2017 was incorporated as a foundation (stichting) under Dutch law on 11 August The statutory seat of the Security Trustee is in Amsterdam, the Netherlands, and it is registered with the Commercial Register of the Chamber of Commerce under number The Security Trustee is a special purpose vehicle and its objects are limited to: (iii) (iv) (v) to act as security trustee or agent in respect of a securitisation transaction involving the Issuer; to act as trustee or agent on behalf of the secured creditors, including, the Noteholders; to act as the beneficiary of payment undertakings, including, any parallel debt arrangements, in connection with its role as security trustee or agent; to receive, hold, keep, manage and enforce security interests granted or to be granted to the security trustee or agent in connection with the securitisation transaction described in this Prospectus; to temporarily invest funds, assets or property obtained as proceeds of security interests as described in paragraph (iv) above for the benefit of the secured parties to the securitisation as described in this Prospectus; and (vi) to enter into agreements and / or undertake other activities, in connection with the objects described above, provided always that such activities are necessary or useful for the entering into and performance of its position of security trustee or agent and trustee or agent for the secured creditors, including, the holders of notes issued by the Issuer in relation to the securitisation transaction referred to in this Prospectus. The sole director of the Security Trustee is Amsterdamsch Trustee s Kantoor B.V., having its registered office at Prins Bernhardplein 200, 1097 JB Amsterdam, the Netherlands. The Security Trustee shall not be liable for any action taken or not taken by it or for any breach of its obligations under or in connection with the Trust Deed or any other Transaction Document to which it is a party, except in the event of its wilful misconduct (opzet), gross negligence (grove nalatigheid), fraud or bad faith, and it shall not be responsible for any act or negligence of persons or institutions selected by it with due care. The Security Trustee Director will enter into the Security Trustee Management Agreement with the Security Trustee and the Issuer. In the Security Trustee Management Agreement the Security Trustee Director will agree and undertake to, among other things, manage the affairs of the Security Trustee in accordance with proper and prudent Dutch business practice and in accordance with the requirements of Dutch law and accounting practice with the same care that it exercises or would exercise in connection with the administration of similar matters held for its own account or for the account of third parties and in such manner as to not adversely affect the then current ratings assigned to the Rated Notes and refrain from taking any action detrimental to the Security Trustee s rights and the ability to meet its obligations under or in connection with the Transaction Documents. In addition, the Security Trustee Director will agree in the Security Trustee Management Agreement that it will not agree to any modification of any agreement, including, the Transaction Documents or enter into any agreement, other than in accordance with the Trust Deed. The Trust Deed provides that the Security Trustee shall not retire or be removed from its duties under the Trust Deed until all amounts payable to the Secured Creditors under the Transaction Documents have been paid in full. However, the Noteholders and Certificateholders of the Most Senior Class, as applicable, shall have the power, exercisable only by an Extraordinary Resolution, to remove the Security Trustee Director as director of the Security Trustee. 93

94 The Security Trustee Management Agreement may be terminated by the Security Trustee (or the Issuer on its behalf) upon the occurrence of certain termination events, including, a default by the Security Trustee Director (unless remedied within the applicable grace period), dissolution and liquidation of the Security Trustee Director or (iii) the Security Trustee Director being declared bankrupt or granted a suspension of payments, provided that the Credit Rating Agencies are notified of such default and after consultation with the Secured Creditors, other than the Noteholders and Certificateholders. Furthermore, the Security Trustee Management Agreement may be terminated by the Security Trustee Director, or the Security Trustee at the end of each calendar year upon 90 days prior written notice, provided that a Credit Rating Agency Confirmation in respect of each Credit Rating Agency is available in respect of such termination. The Security Trustee Director shall resign upon the termination of the Security Trustee Management Agreement, provided that such resignation shall only be effective if and upon a new director reasonably acceptable to the Security Trustee has been appointed and a Credit Rating Agency Confirmation in respect of each Credit Rating Agency is obtained in respect of such appointment. 94

95 3.4 Seller Morgan Stanley Principal Funding, Inc. (the Seller) is a wholly owned subsidiary of Morgan Stanley (NYSE: MS). The Seller is a Delaware limited company and has its executive offices at 1585 Broadway, New York, New York 10036, U.S.A.. The Seller originates commercial mortgage loans secured by multifamily, office, retail, industrial, hotel and self-storage properties and extends warehouse and repurchase financing to commercial and residential mortgage lenders. The Seller also acquires interests in mortgage loans, receivables, and securitises or syndicates such mortgage loans and receivables. Morgan Stanley Principal Funding, Inc. (as Seller) and Morgan Stanley & Co. International plc (as Arranger and Lead Manager) are each an affiliate of each other. 95

96 3.5 Servicer The Issuer will appoint Adaxio B.V. to act as its Servicer and Intertrust Management B.V. to act as its Back Up Servicer Facilitator under the Servicing Agreement. Adaxio B.V. has appointed Stater Nederland B.V. under the Interim Sub-MPT Servicing Agreement as the agent of Adaxio B.V. to undertake and perform certain of the mortgage loan collection and payment transaction services to be provided by the Servicer under the Servicing Agreement. The Servicer has, in accordance with the terms of the Servicing Agreement, agreed to provide certain mortgage loan collection and payment transaction services to the Issuer on a day-to-day basis which include, among other things, the following: (iii) (iv) (v) (vi) (vii) (viii) keep records/books of account/documents in electronic form or on paper for the Issuer and in relation to the Mortgage Loans, the Mortgage Receivables and the Mortgages; keep (electronic) records for all taxation purposes; assist the auditors and provide information to them upon reasonable request; administer the Mortgage Loans, the Mortgage Receivables and the Mortgages in accordance with the administration procedures, as amended from time to time, and do all such things and prepare and send to the Borrowers and / or any other relevant parties all such documents and notices which are incidental to such activities; perform any other obligation agreed to be performed by the Servicer under this Agreement; screen the Borrowers against the lists of sanctioned parties issued by the United States Office of Foreign Assets Control (OFAC), the European Union, and the Netherlands on a quarterly basis; take all other action and do all other things which it would be reasonable to expect a reasonably prudent servicer of residential mortgage loans in the Netherlands to do in servicing its mortgages; and take all reasonable steps to recover all sums due under or in connection with the Mortgage Loans in accordance with the applicable enforcement procedures. On the terms and subject to the conditions of the Servicing Agreement, the Issuer will appoint the Back-Up Servicer Facilitator, to facilitate the appointment of a replacement servicer in the event that the appointment of the Servicer is terminated under and in accordance with the Servicing Agreement. Credit Management & Investor Solutions B.V. Adaxio B.V. (Adaxio) is a fully owned subsidiary of Credit Management & Investor Solutions B.V. (CMIS Group). CMIS Group is owned by Wilhelmina Investments Ltd., which is owned by funds managed by affiliates of Fortress Investment Group LLC (NYSE: FIG). CMIS Group was established in 2010 (it was previously known under the names GMAC RFC / GMAC Hypotheken). In 2012 CMIS Group launched Adaxio which offers servicing solutions from origination and underwriting to master servicing. In 2013, CMIS Group s operations further expanded to include mortgage advisory and mortgage origination services through the acquisition of Welke Beheer B.V. and the Hypotheekshop. This acquisition also provided CMIS Group with a developed loan accounting system and call centre, enhancing servicing capabilities. In the same year CMIS Group purchased the servicing rights of five ELQ Hypotheken B.V.-originated transactions, the Dutch Eurosail and EMF securitisations and one unsecuritised client portfolio. It also absorbed the accompanying servicing teams. In 2015, the group was expanded further with the acquisition of German 96

97 mortgage servicer Paratus AMC GmbH and through the set-up of a commercial real estate servicing platform Brix, with market launch in CMIS Group is structured so that support functions and executive management are provided at group level. Proper corporate governance is a priority for CMIS Group because it presents opportunities to excel in managing risks and add value through increased performance. Since proper governance is of vital importance to our stakeholders, CMIS Group has adopted voluntary compliance with the Dutch Governance Code where and when appropriate and applicable. The non-statutory Board of Executive Directors is primarily responsible for supervision of the Group and its legal entities within the group. It is also responsible for reviewing all major decisions in the company that may materially impact the strategy and / or risk profile and risk appetite of the group. CMIS Group has an above market peer COSO based Risk Assurance Program supported by a technology platform which allows the support management of all risk, compliance and audit programs. The platform provides detailed insights on legal entity, products and process levels. CMIS Group s audited Business Continuity Planning is based on the industry's best practice. In addition, the information security framework has adopted ISO and standards. Through its subsidiaries, CMIS Group currently services beneficial interests in approximately EUR 5.6 billion (as per 30 June 2016) of residential mortgages (through first loss positions), consumer debts and nonperforming asset backed securities. CMIS Group has primary, special and master servicing ratings from Fitch of RPS2, RSS2, and RMS2 respectively and is ISAE 3402 type II audited. Its subsidiaries include AFM regulated entities for both mortgage and consumer loans. CMIS Group was historically based in The Hague. With the acquisition of Welke in 2013 it acquired a second office location in Hoorn. In 2015 both offices were relocated to one location in Amsterdam. Adaxio B.V. Adaxio offers solutions for managing and servicing multi-asset classes such as residential mortgages, consumer loans, commercial real estate loans and commercial real-estate portfolios. Adaxio s servicing organisation consists of the following departments with the attached roles and responsibilities: (iii) Primary Servicing: day to day loan management, notary services, onboarding of loans, loan mutations, (partial) redemption and interest reset management. Special Servicing: early arrears management, late arrears management, loss mitigation such as short sale / auction, special care, field services and shortfalls. Master Servicing: (daily) client reporting on loan level, RMBS reporting, monthly reports to rating agencies (containing dataset, loss overview and delinquency tables) and quarterly investor reports (based on the Dutch Securitization Association template). Adaxio services in accordance with market and respective AFM standards and, at minimum, in full compliance with the required duty of care standards (zorgplicht) as applicable under Dutch law. In addition to duty of care principles, borrower cooperation will be heavily emphasized in any situations requiring special servicing intervention. Budget coaching services, in addition to other field servicing strategies, are implemented to maintain borrower cooperation throughout the special servicing lifecycle. Adaxio is located at Kingsfordweg , 1043GP Amsterdam, The Netherlands. The information under this Section 3.5 (Servicer) has been provided by the Servicer. 97

98 3.6 Issuer Administrator The Issuer will appoint Adaxio B.V. under the Administration Agreement to act as Issuer Administrator. Adaxio B.V. is incorporated under Dutch law as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), having its corporate seat in Amsterdam, the Netherlands, and its telephone number is +31 (0) The Issuer Administrator is registered with the Commercial Register of the Chamber of Commerce under number The Issuer Administrator will provide the Issuer Services. If the Issuer Administrator defaults in the performance of the Issuer Services on the terms and subject to the conditions of the Administration Agreement, it will be replaced by the Back-Up Issuer Administrator. See further Section 5.6 (Administration Agreement). 98

99 3.7 Back-Up Servicer Facilitator On the terms and subject to the conditions of the Servicing Agreement, the Issuer will appoint the Back-Up Servicer Facilitator to facilitate the appointment of a replacement servicer in the event that the appointment of the Servicer is terminated under and in accordance with the Servicing Agreement. 99

100 3.8 Other Parties Issuer Account Bank: Directors: ABN AMRO Bank N.V., a public company with limited liability (naamloze vennootschap) incorporated under Dutch law, with registered office at Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number Intertrust Management B.V., the sole director of the Issuer and the Shareholder. Amsterdamsch Trustee s Kantoor B.V., the sole director of the Security Trustee. Paying Agent: Reference Agent: Listing Agent: Arranger: Lead Manager: Retention Holder: Originator: Collection Foundation: Collection Foundation Account Bank: Common Service Provider: ABN AMRO Bank N.V., a public company with limited liability (naamloze vennootschap) incorporated under Dutch law, with registered office at Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number ABN AMRO Bank N.V., a public company with limited liability (naamloze vennootschap) incorporated under Dutch law, with registered office at Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number Arthur Cox Listing Services Limited Morgan Stanley & Co. International plc Morgan Stanley & Co. International plc Morgan Stanley Principal Funding, Inc. ELQ Portefeuille I B.V., incorporated under Dutch law as a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), having its corporate seat in Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number Stichting ELQ Ontvangsten, established under Dutch law as a foundation (stichting), having its corporate seat in Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number ABN AMRO Bank N.V., a public company with limited liability (naamloze vennootschap) incorporated under Dutch law, with registered office at Gustav Mahlerlaan 10, 1082 PP Amsterdam, the Netherlands, and registered with the Commercial Register of the Chamber of Commerce under number Bank of America National Association, London Branch, a national banking 100

101 association organised and existing under the laws of the United States of America, acting through its London branch. Common Safekeeper: Euroclear in respect of the Class A Notes and Bank of America National Association, London Branch in respect of the Class B Notes, Class C Notes, Class D Notes, Class E Notes, Class Z Notes and Certificates. 101

102 4. THE NOTES 4.1 Terms and Conditions of the Notes 1. General If Notes are issued in definitive form, the terms and conditions (the Conditions) will be as set out below. The Conditions will be endorsed on each Definitive Note if they are issued. While the Notes remain in global form, the same terms and conditions govern the Notes, except to the extent that they are not appropriate for Notes in global form. See further Section 4.3 (Form of Notes and Certificates). The issue of the EUR 98,946,000 Class A mortgage-backed notes 2017 due January 2040 (the Class A Notes), the EUR 19,010,000 Class B mortgage-backed notes 2017 due January 2040 (the Class B Notes), the EUR 7,401,000 Class C mortgage-backed notes 2017 due January 2040 (the Class C Notes), the EUR 7,401,000 Class D mortgage-backed notes 2017 due January 2040 (the Class D Notes), the EUR 9,038,000 Class E mortgage-backed notes 2017 due January 2040 (the Class E Notes) and the EUR 14,024,000 Class Z mortgage-backed notes 2017 due January 2040 (the Class Z Notes, and together with the Class A Notes, Class B Notes, Class C Notes, Class D Notes and Class E Notes, the Notes) was authorised by a resolution of the managing director of the Issuer passed on or about 16 January The Notes are issued under the Trust Deed on the Closing Date. Unless otherwise defined in these Conditions, words and expressions used in these Conditions are defined in a master definitions and common terms agreement dated the Signing Date between, among others, the Issuer, the Security Trustee and the Seller as amended from time to time (the Master Definitions and Common Terms Agreement). Such words and expression shall, except where the context requires otherwise, have the same meanings in these Conditions. If the terms or definitions in the Master Definitions and Common Terms Agreement would conflict with the terms and definitions used in these conditions, the terms and definitions of these Conditions shall prevail. The statements in these Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed, which will include the forms of the Notes and Coupons, and the Temporary Global Notes and the Permanent Global Notes, the Paying Agency Agreement, (iii) the Servicing Agreement, (iv) the Parallel Debt Agreement and (v) the Pledge Agreements. Copies of the Trust Deed, Paying Agency Agreement, the Parallel Debt Agreement, the Pledge Agreements, and the Master Definitions and Common Terms Agreement and certain other Transaction Documents (see further Section 8 (General) below) are available for inspection, free of charge, by Noteholders and prospective Noteholders at the specified office of the Paying Agent and the present office of the Security Trustee, being at the date hereof Prins Bernhardplein 200, 1097 JB Amsterdam, the Netherlands, and electronic from upon request at securitisation@intertrustgroup.com. The Noteholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed, the Paying Agency Agreement, the Parallel Debt Agreement, the Pledge Agreements and the Master Definitions and Common Terms Agreement. 2. Form, Denomination and Title The Notes will be in bearer form serially numbered and in respect of the Rated Notes, with Coupons (and if necessary, talons) attached on issue, in denominations of EUR 100,000 and in integral multiples of EUR 1,000 in excess of such denomination. Under Dutch law, the valid transfer of Notes or Coupons requires, among other things, delivery (levering) of such Notes or Coupons. The Issuer, the Security Trustee and the Paying Agent may, to the fullest extent permitted by law, treat 102

103 the holder of any Note and of the Coupons appertaining or attached to such Notes as its absolute owner for all purposes (whether or not payment under such Note or Coupon shall be overdue and notwithstanding any notice of ownership or writing in respect of such Note or Coupon, or any notice of previous loss or theft of such Note or Coupon), including payment and no person shall be liable for so treating such holder. Evidence of the signatures on and issue by the Issuer of the Notes may be under hand or by facsimile, portable document format or any other electronic format. For as long as the Notes are represented by a Global Note and Euroclear or Clearstream, Luxembourg so permit, such Notes will be tradeable only in the minimum authorised denomination of EUR 100,000 and in integral multiples of EUR 1,000 in excess of such denomination. Notes in definitive form, if issued, will only be printed and issued in denominations of EUR 100,000 in each case increased with any amount in excess of such denomination in integral multiples of EUR 1, Status, Priority and Security (a) (b) The Notes of each Class are direct and unconditional obligations of the Issuer and rank pari passu and pro rata without any preference or priority among Notes of the same Class. The Most Senior Class of Notes is: (iii) (iv) (v) (vi) the Class A Notes whilst they remain outstanding; and after that the Class B Notes whilst they remain outstanding; and after that the Class C Notes whilst they remain outstanding; and after that the Class D Notes whilst they remain outstanding; and after that the Class E Notes whilst they remain outstanding; and after that the Class Z Notes whilst they remain outstanding. (c) Priority In accordance with these conditions and the Trust Deed: The Class A Notes will rank pari passu without preference or priority among themselves in relation to payment of interest and principal at all times. The Class B Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class B Net WAC Additional Amount (if any) at all times, but subordinate to, among other things, the Class A Notes (except that all payments in respect of any Class B Net WAC Additional Amount will rank subordinate to, among other things, all payments due under the Notes other than all payments in respect of any Class C Net WAC Additional Amount, any Class D Net WAC Additional Amount, any Class E Net WAC Additional Amount and any principal amounts due under the Class Z Notes). The Class C Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class C Net WAC Additional Amount (if any) at all times, but subordinate to, among other things, the Class A Notes and the Class B Notes (except that all payments in respect of any Class C Net WAC Additional Amount will rank subordinate to, among other things, all payments due under the Notes other than all payments in respect of any Class D Net WAC Additional Amount, any Class E Net WAC Additional Amount and any principal amounts due under the Class Z Notes). 103

104 The Class D Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class D Net WAC Additional Amount (if any) at all times, but subordinate to, among other things, the Class A Notes, the Class B Notes and the Class C Notes (except that all payments in respect of any Class D Net WAC Additional Amount will rank subordinate to, among other things, all payments due under the Notes other than all payments in respect of any Class E Net WAC Additional Amount and any principal amounts due under the Class Z Notes). The Class E Notes will rank pari passu without preference or priority among themselves in relation to payment of interest, principal and the Class E Net WAC Additional Amount (if any) at all times, but subordinate to, among other things, the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes, as provided in the Conditions and the Transaction Documents (except that all payments in respect of any Class E Net WAC Additional Amount will rank subordinate to, among other things, all payments due under the Notes other than any principal amounts due under the Class Z Notes). The Class Z Notes will rank pari passu without preference or priority among themselves in relation to payment of principal at all times, but subordinated to, among other things, the Rated Notes and any Net WAC Additional Amount. (d) The Security for the obligations of the Issuer towards, among other things, the Noteholders will be created pursuant to, and on the terms set out in, the Trust Deed and the Pledge Agreements, and under which, among other things, the following security rights will be created: (iii) (iv) a first ranking right of pledge by the Issuer to the Security Trustee over the Mortgage Receivables and the Beneficiary Rights and all rights ancillary to such Mortgage Receivables; a first ranking right of pledge by the Issuer to the Security Trustee over the Issuer Rights including all rights ancillary to such Issuer Rights; a first ranking right of pledge by the Issuer to the Security Trustee in respect of its rights under the Issuer Accounts against the Issuer Account Bank; and a first ranking disclosed right of repledge (herpandrecht) by the Issuer in respect of the Collection Foundation s rights over the Collection Foundation Account in favour of, among others, the Security Trustee, and, by operation of the right of repledge in favour of the Security Trustee, a second ranking disclosed right of pledge by the Collection Foundation in respect of its rights over the Collection Foundation Account in favour of, among others, the Issuer. (e) The obligations under the Notes are secured (indirectly) by the Security. The Trust Deed contains provisions requiring the Security Trustee to have regard only to the interests of the Noteholders of a Class and not to consequences of such exercise upon individual Noteholders. If, in the sole opinion of the Security Trustee, there is a conflict of interest between any Classes of Noteholders, the Security Trustee shall have regard only to the interest of the Most Senior Class, as applicable. In addition, the Security Trustee shall have regard to the interest of the other Secured Creditors. In case of a conflict of interest between the Secured Creditors, the ranking set out in the Post-Enforcement Priority of Payments determines which interest of which Secured Creditor prevails. 4. Covenants of the Issuer As long as any of the Notes remain outstanding, the Issuer shall carry out its business in accordance with proper and prudent Netherlands business practice and in accordance with the requirements of 104

105 Dutch law and accounting practice, and shall not, except to the extent permitted by the Transaction Documents or with the prior written consent of the Security Trustee: (a) (b) (c) (d) (e) (f) (g) (h) (j) (k) (l) carry out any business other than as described in the Prospectus and as contemplated in the Transaction Documents; incur any indebtedness in respect of borrowed money whatsoever or give any guarantee or indemnity in respect of any indebtedness except as contemplated in the Transaction Documents; create or promise to create any mortgage, charge, pledge, lien or other security interest whatsoever over any of its assets, or use, invest, sell, transfer or otherwise dispose of or grant any options or rights to any part of its assets except as contemplated by the Transaction Documents; consolidate or merge with any other person or convey or transfer its properties or assets substantially or as an entirety to any person; permit the validity or effectiveness of the Transaction Documents, or the priority of the security created thereby or pursuant thereto to be amended, terminated, waived, postponed or discharged, or permit any person whose obligations form part of such security rights to be released from such obligations or consent to any waiver except as contemplated in the Transaction Documents; have any employees or premises or have any subsidiary or subsidiary undertaking; have an interest in any bank account other than the Issuer Accounts unless all rights in relation to such account will have been pledged to the Security Trustee as provided in Condition 3(d)(iii); take any action which will cause its centre of main interest within the meaning of the insolvency regulation to be located outside the Netherlands; amend, supplement or otherwise modify its articles of association or other constitutive documents; pay any dividend or make any other distribution to its shareholder(s), other than in accordance with the applicable Priority of Payments or issue any further shares; engage in any activity whatsoever which is not incidental to or necessary in connection with, any of the activities which the relevant Transaction Documents provide or envisage that the Issuer will engage in; and purchase or otherwise acquire any Certificates. 5. Interest (a) Period of Accrual Each class of Rated Notes shall bear interest on their Principal Amount Outstanding from and including the Closing Date. Each such Note (or in the case of the redemption of part only of a Note, that part only of such Note) shall cease to bear interest from its due date for redemption unless, upon due presentation, payment of the relevant amount of principal or any part of it is improperly withheld or refused. In such event, interest will continue to accrue on such Notes (before and after 105

106 any judgment) at the rate applicable to such Note up to but excluding the date on which, on presentation of such Note, payment in full of the relevant amount of principal is made or (if earlier) the seventh day after notice is duly given by the Paying Agent to the holder of such Note (in accordance with Condition 14 (Notices)) that upon presentation of such Note, such payments will be made, provided that upon such presentation payment is in fact made. Whenever it is necessary to compute an amount of interest in respect of any Note for any period (including any Interest Period), such interest shall be calculated on the basis of the actual days elapsed in such period divided by a 360 day year, provided that the number of days in each Interest Period shall be calculated as if the Notes Payment Dates were not subject to adjustment, except for the first Interest Period which will commence on (and include) the Closing Date and end on (but exclude) the Notes Payment Date falling in April (b) Interest Periods and Notes Payment Dates Interest on each class of Rated Notes is payable by reference to the successive Interest Periods. Each successive Interest Period will commence on (and include) a Notes Payment Date and end on (but exclude) the next succeeding Notes Payment Date, except for the first Interest Period which will commence on (and include) the Closing Date and end on (but exclude) the Notes Payment Date falling in April Interest on the Rated Notes shall be payable quarterly in arrears in EUR in respect of the Principal Amount Outstanding of such Rated Note on each Notes Payment Date. No interest will be payable in respect of the Class Z Notes. (c) Interest on the Rated Notes up to (and including) the First Optional Redemption Date Up to the First Optional Redemption Date, the interest rate applicable on each class of Rated Notes will accrue at an annual rate equal to the sum of the Euro Interbank Offered Rate (Euribor) for three month deposits in EUR (determined in accordance with paragraph (h) below) (or, in respect of the first Interest Period, the rate which represents the linear interpolation of Euribor for three month deposits in EUR and Euribor for four month deposits in EUR, rounded, if necessary, to the 5th decimal place with , being rounded upwards), plus an Initial Margin of: (iii) (iv) (v) for the Class A Notes, 0.75 per cent. per annum; for the Class B Notes, 1.50 per cent. per annum; for the Class C Notes, 2.10 per cent. per annum; for the Class D Notes, 2.75 per cent. per annum; and for the Class E Notes, 3.75 per cent. per annum, which interest rate shall in each case be a minimum of 0.00 per cent. per annum. (d) Interest on the Rated Notes following the First Optional Redemption Date If on the First Optional Redemption Date the Notes will not have been redeemed in full, the interest rate applicable on each class of Rated Notes will accrue at an annual rate equal to the sum of Euribor for three month deposits, plus a Step-up Margin of: for the Class A Notes, 1.25 per cent. per annum; 106

107 (iii) (iv) (v) for the Class B Notes, 2.50 per cent. per annum; for the Class C Notes, 3.10 per cent. per annum; for the Class D Notes, 3.75 per cent. per annum; and for the Class E Notes, 4.75 per cent. per annum, which interest rate shall in each case be a minimum of 0.00 per cent. per annum. (e) Payment of Net WAC Additional Amounts On each Notes Payment Date the Issuer shall, in accordance with the applicable Priority of Payments, pay any Net WAC Additional Amounts that are due and payable on such Notes Payment Date. (f) Subordination by Deferral Interest (iii) The Issuer shall not defer any interest payable on the Class A Notes. If, on any Notes Payment Date, a Net WAC Additional Amount has been determined and has not been paid on such Notes Payment Date or if the Issuer otherwise has insufficient funds to make payment in full of all amounts of interest (which shall, for the purposes of this Condition 5(f) (Subordination by Deferral), include any interest previously deferred under this Condition 5(f) (Subordination by Deferral) and accrued interest thereon) payable in respect of the Rated Notes (other than the Class A Notes) after having paid or provided for items of higher priority in the Revenue Priority of Payments, then the Issuer shall be entitled to defer to the next Notes Payment Date the payment of interest (such interest, the Deferred Interest) in respect of the relevant Rated Notes (other than the Class A Notes) to the extent only of (as the case may be) such Net WAC Additional Amount and / or any such insufficiency of funds. Any amounts of Deferred Interest in respect of a Class of Rated Notes (other than the Class A Notes) shall accrue additional interest (Additional Interest) at the per annum rate equal to the lesser of the Euribor for three month deposits applicable during such Interest Period plus the relevant Margin and the Net WAC Cap (in each case not being less than zero). Such Deferred Interest and Additional Interest shall, in any event, become payable on the next following Notes Payment Date (unless and to the extent that this Condition 5(f) (Subordination by Deferral) again applies) or on such earlier date as the relevant Class of Rated Notes becomes due and repayable in full in accordance with these Conditions. Notification (iv) As soon as practicable after becoming aware that any part of a payment of interest or Net WAC Additional Amount on a Class of Rated Notes (other than the Class A Notes) will be deferred or that a payment previously deferred will be made in accordance with this Condition 5(f) (Subordination by Deferral), the Issuer will give notice of such deferral or intended payment to the relevant Class of Noteholders, as appropriate, in accordance with Condition 14 (Notices). Any deferral of interest in accordance with this Condition 5(f) (Subordination by Deferral) will not constitute an Event of Default. 107

108 The provisions of this Condition 5(f) (Subordination by Deferral) shall cease to apply on the Final Maturity Date, or any earlier date on which the Notes are redeemed in full or, are required to be redeemed in full, at which time all deferred interest and accrued interest on any deferred interest shall become due and payable. (g) Euribor For the purpose of Conditions 5(c) (Interest on the Rated Notes up to (and including) the First Optional Redemption Date) and (d) Interest on the Rated Notes following the First Optional Redemption Date), Euribor will be determined as follows: The Reference Agent will, subject to Condition 5(c) (Interest on the Rated Notes up to (and including) the First Optional Redemption Date), obtain for each Interest Period the rate equal to Euribor for three month deposits in euros. The Reference Agent shall use the Euribor rate as determined and published jointly by the European Banking Federation and ACI - The Financial Market Association and which appears for information purposes on the Reuters Screen EURIBOR01, (or, if not available, any other display page on any screen service maintained by any registered information vendor for the display of the Euribor rate selected by the Reference Agent) as at or about am (Central European Time) on the day that is two Business Days preceding the first day of each Interest Period (each an Interest Determination Date); If, on the relevant Interest Determination Date, such Euribor rate is not determined and published jointly by the European Banking Association and ACI The Financial Market Association, or if it is not otherwise reasonably practicable to calculate the rate under above, the Reference Agent will: A. request the principal Euro-zone office of each of four major banks in the Eurozone interbank market (the Euribor Reference Banks) to provide a quotation for the rate at which three month euro deposits are offered by it in the Eurozone interbank market at approximately am (Central European Time) on the relevant Interest Determination Date to prime banks in the Euro-zone interbank market in an amount that is representative for a single transaction at that time; and B. if at least two quotations are provided, determine the arithmetic mean (rounded, if necessary, to the fifth decimal place with being rounded upwards) of such quotations as provided; and (iii) if fewer than two such quotations are provided as requested, the Reference Agent will determine the arithmetic mean (rounded, if necessary to the fifth decimal place with being rounded upwards) of the rates quoted by major banks, of which there shall be at least two in number, in the Euro-zone, selected by the Reference Agent, at approximately am (Central European Time) on the relevant Interest Determination Date for three month deposits to leading Euro-zone banks in an amount that is representative for a single transaction in that market at that time, and Euribor for such Interest Period shall be the rate per annum equal to Euribor for three month euro deposits as determined in accordance with this paragraph (g), provided that if the Reference Agent is unable to determine Euribor in accordance with the above provisions in relation to any Interest Period, Euribor applicable to each class of Rated Notes during such Interest Period will be Euribor last determined in relation to such class of Rated Notes. 108

109 (h) Determination of the Interest Rates and Calculation of Floating Interest Amounts in respect of the Rated Notes The Reference Agent will, as soon as practicable after am (Central European Time) on each Interest Determination Date, determine: (iii) the rates of interest referred to in Condition 5(c) (Interest on the Rated Notes up to and including the First Optional Redemption Date) and Condition 5(d) (Interest on the Rated Notes following the First Optional Redemption Date) for each class of Rated Notes; the Net WAC Cap, if any Net WAC Cap shall apply to any Rated Notes for the related Interest Period; and calculate the amount of interest payable on each such Notes for the following Interest Period (the Floating Interest Amount) by applying the relevant Interest Rates to the Principal Amount Outstanding of each class of Rated Notes, respectively, on the first day of the relevant Interest Period, and, where applicable any Net WAC Additional Amount. The determination of, among other things, the relevant Interest Rates and each Floating Interest Amount by the Reference Agent shall (in the absence of manifest error) be final and binding on all parties. Notification of Interest Rates, Floating Interest Amounts and Notes Payment Dates in respect of the Rated Notes The Reference Agent will cause the relevant Interest Rates, the relevant Floating Interest Amount, the Net WAC Additional Amounts and the Notes Payment Date applicable to each class of Rated Notes to be notified to the Issuer, the Security Trustee, the Paying Agent, the Issuer Administrator, the holders of such Notes and (for so long as the Notes are admitted to the Official List and trading on the regulated market of the Irish Stock Exchange), the Irish Stock Exchange. The Interest Rates, Floating Interest Amount, the Net WAC Additional Amounts and Notes Payment Date so published may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without notice in the event of an extension or shortening of the Interest Period. (j) Calculation by Security Trustee in respect of the Rated Notes If the Reference Agent at any time for any reason does not determine the relevant Interest Rates in accordance with Conditions 5(g) (Euribor) and 5(h) (Determination of the Interest Rates and Calculation of Floating Interest Amounts in respect of the Rated Notes) or fails to calculate the relevant Floating Interest Amounts in accordance with Conditions 5(g) (Euribor) and 5(h) (Determination of the Interest Rates and Calculation of Floating Interest Amounts in respect of the Rated Notes), the Security Trustee shall, or a party so appointed by the Security Trustee shall on behalf of the Security Trustee, determine the Interest Rate, at such rate as, in its absolute discretion (having such regard as it shall think fit to the procedure described in Conditions 5(g) (Euribor) and 5(h) (Determination of the Interest Rates and Calculation of Floating Interest Amounts in respect of the Rated Notes), it shall deem fair and reasonable under the circumstances, or, as the case may be, the Security Trustee shall calculate the relevant Floating Interest Amounts in accordance with Conditions 5(g) (Euribor) and 5(h) (Determination of the Interest Rates and Calculation of Floating Interest Amounts in respect of the Rated Notes), and each such determination or calculation shall be final and binding on all parties. (k) Reference Agent 109

110 The Issuer will procure that, as long as any of the Notes remains outstanding, there will at all times be a Reference Agent. The Issuer has, subject to prior written consent of the Security Trustee, the right to terminate the appointment of the Reference Agent by giving at least 90 days notice in writing to that effect. Notice of any such termination will be given to the holders of the Notes in accordance with Condition 14 (Notices). If any person shall be unable or unwilling to continue to act as the Reference Agent or if the appointment of the Reference Agent shall be terminated, the Issuer will, with the prior written consent of the Security Trustee, appoint a successor reference agent to act in its place, provided that neither the resignation nor removal of the Reference Agent shall take effect until a successor approved in writing by the Security Trustee has been appointed. (l) No interest on the Class Z Notes No interest will be payable in respect of the Class Z Notes. 6. Payment (a) (b) (c) (d) Payment of principal and interest in respect of the Notes will be made upon presentation of the Note and against surrender of the relevant Coupon appertaining thereto at any specified office of the Paying Agent by transfer to a euro account maintained by the payee with a bank in the Netherlands. All such payments will be subject in all cases to any other applicable fiscal or other laws and regulations in the place of payment or other laws and regulations to which the Issuer agrees to be subject and the Issuer will be liable for any taxes or duties of whatever nature imposed or levied by such laws, regulations or agreements. At the Final Maturity Date, or at such earlier date on which the Notes become due and payable, the Notes should be presented for payment together with all unmatured Coupons appertaining thereto, failing which the full amount of any such missing unmatured Coupons (or, in the case of payment not being made in full, that proportion of the full amount of such missing unmatured Coupons which the sum of principal so paid bears to the total amount of principal due) will be deducted from the sum due for payment. Each amount so deducted will be paid in the manner mentioned above against surrender of the relevant missing Coupon at any time before the expiry of five years following the due date for payment of such principal (whether or not such Coupons would have become unenforceable pursuant to Condition 9 (Prescription)). If the relevant Notes Payment Date is not a day on which banks are open for business in the place of presentation of the relevant Note and Coupon (a Local Business Day) the holder of the Note shall not be entitled to payment until the next following Local Business Day, or to any interest or other payment in respect of such delay, provided that in the case of payment by transfer to a euro account as referred to above, the Paying Agent shall not be obliged to credit such account until the day on which banks in the place of such account is open for business immediately following the day on which banks are open for business in the Netherlands. The name of the Paying Agent and details of its offices are set out on the last page of the Prospectus. The Issuer reserves the right at any time to vary or terminate the appointment of the Paying Agent and to appoint additional or other paying agents provided that no paying agents located in the United States of America will be appointed. Notice of any termination or appointment of a Paying Agent will be given to the Noteholders in accordance with Condition 14 (Notices). 7. Redemption (a) Definitions For the purposes of these Conditions the following term shall have the following meaning: 110

111 Principal Amount Outstanding on any date shall be the principal amount of that Note upon issue less the aggregate amount of all Redemption Amounts, that have become due and payable prior to such date, provided that for the purpose of Conditions 5 (Interest), 7 (Redemption) and Condition 10 (Limited recourse), all Redemption Amounts that have become due and not been paid shall not be so deducted. (b) Redemption Amount The principal amount redeemable in respect of each relevant Note in respect of a Class of Notes on the relevant Notes Payment Date (each a Redemption Amount), shall be the aggregate amount (if any) of the Available Principal Funds on the Notes Calculation Date relating to such Notes Payment Date available for such Class of Notes, divided by the Principal Amount Outstanding of the relevant Class subject to such redemption (rounded down to the nearest euro) and multiplied by the Principal Amount Outstanding of the relevant Note on such Notes Calculation Date, provided always that the Redemption Amount may never exceed the Principal Amount Outstanding of the relevant Note of the relevant Class. Following application of the Redemption Amount to redeem a Note, the Principal Amount Outstanding of such Note shall be reduced accordingly. (c) Determination of the Available Principal Funds, Redemption Amount and Principal Amount Outstanding (iii) On each Notes Calculation Date (to the extent Notes are redeemable on the immediately succeeding Notes Payment Date), the Issuer shall determine (or cause the Issuer Administrator to determine) (a) the Available Principal Funds, (b) the Available Revenue Funds, (c) the Redemption Amount due for the relevant Class of Notes, on the relevant Notes Payment Date and (d) the Principal Amount Outstanding of the relevant Notes on the first day following such Notes Payment Date. Each such determination by or on behalf of the Issuer shall in each case (in the absence of a manifest error) be final and binding on all persons. The Issuer shall on each Notes Calculation Date procure that the items specified and determined under paragraph above, be notified forthwith to the Security Trustee, the Paying Agent, the Reference Agent, Euroclear or Clearstream, Luxembourg, the stock exchange on which the Notes are listed and the Noteholders in accordance with Condition 14 (Notices). If no Redemption Amount is due to be made on the Notes on any applicable Notes Payment Date, a notice to this effect will be given to the Noteholders in accordance with Condition 14 (Notices). If the Issuer or the Issuer Administrator on its behalf does not at any time for any reason determine any of the amounts specified in paragraphs and above, such amount shall be determined by the Security Trustee in accordance with this Condition (but based upon the information in its possession as to the relevant amounts and each such determination or calculation shall be deemed to have been made by the Issuer and shall in each case (in the absence of a manifest error) be final and binding on all persons. (d) Final redemption If and to the extent not otherwise redeemed, the Issuer will redeem the Notes at their respective Principal Amount Outstanding on the Final Maturity Date, subject to Condition 3 (Status, Priority and Security) and Condition 10 (Limited recourse). (e) Mandatory Redemption of the Notes 111

112 Unless previously redeemed in full and provided that no Enforcement Notice has been served in accordance with Condition 11 (Event of Default), the Issuer will apply any Available Principal Funds, on the terms and subject to the conditions of the Redemption Priority of Payments, to redeem the Notes (in part), on each Notes Payment Date at their respective Principal Amount Outstanding, on a pro rata and pari passu basis within each Class, subject to Condition 10 (Limited recourse), in the following sequential order: (iii) (iv) (v) (vi) first, the Class A Notes until fully redeemed; second, the Class B Notes until fully redeemed; third, the Class C Notes until fully redeemed; fourth, the Class D Notes until fully redeemed; fifth, the Class E Notes until fully redeemed; and sixth, the Class Z Notes. (f) Mandatory redemption under the Mortgage Portfolio Purchase Option or a Market Sale Process (iii) The Noteholders acknowledge and agree that the Notes will be redeemed in full, if (a) the Mortgage Portfolio Option Holder exercises the Mortgage Portfolio Purchase Option under and in accordance with the Certificates Conditions and the Trust Deed; or (b) the Issuer is obliged to undertake a Market Sale Process under and in accordance with the Certificates Conditions, the Trust Deed and the Liquidation Agent Agreement, and in each case, subject to Condition 3 (Status, Priority and Security) and Condition 10 (Limited recourse). On the exercise of the Mortgage Portfolio Purchase Option or if the Issuer undertakes a Market Sale Process, the consideration received by the Issuer will be applied in accordance with the Post-Enforcement Priority of Payments (regardless of whether an Enforcement Notice has or has not been delivered at that time) on the immediately succeeding Notes Payment Date, with the result that the Notes will be redeemed in full in accordance with this Condition 7(f) (Mandatory redemption under the Mortgage Portfolio Purchase Option or a Market Sale Process) and subject to Condition 10 (Limited recourse). The Notes redeemed under Condition 7(f) will be redeemed at an amount not less than the Mortgage Portfolio Purchase Price or not less than the Market Sale Purchase Price Floor, as applicable. (g) Mandatory redemption upon exercise of Clean-up Call Option If on any Notes Payment Date, the aggregate Principal Amount Outstanding of the Notes is not more than 10 per cent. of the aggregate Principal Amount Outstanding of the Notes on the Closing Date (and provided that the Mortgage Portfolio Option Holder has not provided a notice to the Issuer to exercise the Mortgage Portfolio Purchase Option), the Seller has the option (but not the obligation) to repurchase the Mortgage Receivables, provided that the Mortgage Portfolio Option Holder has not on such Notes Payment Date provided a notice to the Issuer to exercise the Mortgage Portfolio Purchase Option (the Clean-up Call Option). If the Clean-up Call Option is exercised by the Seller, the Issuer has the obligation to sell and assign all (but not some only) of the Mortgage Receivables to the Seller or any third party appointed by the Seller at its sole discretion on or prior to the relevant Notes Payment Date. The Issuer shall apply the proceeds of such sale to fully redeem the Notes at their 112

113 respective Principal Amount Outstanding, subject to and in accordance with Condition 3 (Status, Priority and Security) and Condition 10 (Limited recourse). (h) Mandatory redemption under an Issuer Sale Process (iii) Unless already then redeemed in full, if the Issuer under an Issuer Sale Process has received a Binding Offer from a Committed Bidder and has completed such Issuer Sale Process relating to such offer, on the terms and subject to the conditions of the Trust Deed, the Issuer will redeem all (but not some only) of the Notes. Such Notes will be redeemed at a purchase price not less than the Issuer Sale Purchase Price Floor, subject to Condition 3 (Status, Priority and Security) and Condition 10 (Limited recourse). The Issuer shall notify the exercise of such process by giving not more than 60 nor less than 30 days notice to the Noteholders and the Security Trustee prior to the relevant Notes Payment Date. The Issuer shall apply funds it has received to redeem the Notes under this Condition 7(h) (Mandatory redemption under an Issuer Sale Process), in accordance with the Post- Enforcement Priority of Payments (regardless of whether an Enforcement Notice has or has not been delivered at that time) on the relevant Notes Payment Date. Optional redemption for tax reasons All (but not some only) of the Notes may be redeemed at the option of the Issuer on any Notes Payment Date, at their Principal Amount Outstanding plus accrued and unpaid interest up to (and including) the date of redemption (including any Net WAC Additional Amount) and all other amounts required to be paid in priority to or pari passu with the Notes on such date in accordance with the Post-Enforcement Priority of Payments, and subject to Condition 3 (Status, Priority and Security) and Condition 10 (Limited recourse), if, immediately prior to giving such notice, the Issuer has satisfied the Security Trustee that: the Issuer is or will be obliged to make any withholding or deduction for, or on account of, any taxes, duties, or charges of whatsoever nature from payments in respect of any Class of Notes as a result of any change in, or amendment to, the application of the laws or regulations of the Netherlands (including any guidelines issued by the tax authorities) or any other jurisdiction or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations (including a holding by a court of competent jurisdiction), which becomes effective on or after the Closing Date and such obligation cannot be avoided by the Issuer taking reasonable measures available to it; and the Issuer will have sufficient funds available on the Notes Calculation Date immediately preceding such Notes Payment Date to discharge all amounts of principal and interest due under the Notes and any amounts required to be paid in priority or pari passu with each Class of Notes in accordance with the Trust Deed, (the Tax Call Option). No Class of Notes may be redeemed under such circumstances unless all Classes of Notes (or such of them as are then outstanding) are also redeemed in full subject to Condition 3 (Status, Priority and Security) and Condition 10 (Limited recourse), at the same time. The Issuer shall notify the exercise of such option by giving not more than 60 nor less than 30 days notice to the Noteholders and the Security Trustee prior to the relevant Notes Payment Date. 113

114 The Issuer shall apply funds it has received to redeem the Notes under this Condition 7 (Optional redemption for tax reasons), in accordance with the Post-Enforcement Priority of Payments (regardless of whether an Enforcement Notice has or has not been delivered at that time) on the relevant Notes Payment Date. 8. Taxation (a) General All payments of, or in respect of, principal of and interest on the Notes will be made without withholding of, or deduction for, or on account of any present or future taxes, duties, assessments or charges of whatsoever nature imposed or levied by or on behalf of the Netherlands or any other jurisdiction, any authority therein or thereof having power to tax unless the withholding or deduction of such taxes, duties, assessments or charges are required by law. In that event, the Issuer will make the required withholding or deduction of such taxes, duties, assessments or charges for the account of the Noteholders, as the case may be, and shall not pay any additional amounts to such Noteholders. (b) FATCA Withholding Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986 impose a new reporting regime and, potentially, a 30 per cent. withholding tax with respect to certain payments from sources within the United States, foreign passthru payments made to certain non-u.s. financial institutions that do not comply with this new reporting regime, and (iii) payments to certain investors that do not provide identification information with respect to interests issued by a participating non- U.S. financial institution. If an amount in respect of FATCA Withholding were to be deducted or withheld either from amounts due to the Issuer or from interest, principal or other payments made in respect of the Notes, neither the Issuer nor any paying agent nor any other person would, pursuant to the conditions of the Notes, be required to pay additional amounts as a result of the deduction or withholding. 9. Prescription Claims against the Issuer for payment in respect of the Notes and Coupons shall become prescribed and become void unless made within five years from the date on which such payment first becomes due. 114

115 10. Limited recourse (a) (b) Notwithstanding any other Condition or provision of any Transaction Document, all obligations of the Issuer to the Noteholders are limited in recourse to the property, assets and undertaking of the Issuer and which is the subject of the Security. In the event that all the Security in respect of the Notes and the Coupons appertaining thereto has been fully enforced and the proceeds of such enforcement and any other amounts received by the Security Trustee, after payment in full of all other claims ranking under the Trust Deed in priority to a Class of Notes, as applicable, are insufficient to pay in full all principal and interest, if any, and other amounts whatsoever due in respect of such Class of Notes, as applicable, the Noteholders of the relevant Class of Notes, as applicable, shall have no further claim against the Issuer or the Security Trustee in respect of any such unpaid amounts, and such unpaid amounts shall on the day following such application in full be deemed to be discharged in full and any relevant payment rights shall be deemed to cease. 11. Events of Default The Security Trustee at its discretion may, and if so directed by an Extraordinary Resolution of the Noteholders of the Most Senior Class, as applicable (subject, in each case, to being indemnified to its satisfaction) (in each case, the Relevant Class) shall (but in the case of the occurrence of any of the events mentioned in (b) below, only if the Security Trustee shall have certified in writing to the Issuer that such an event is, in its opinion, materially prejudicial to the Noteholders of the Relevant Class) give an Enforcement Notice to the Issuer that the Notes are, and each Note shall (without further action or formality) become, immediately due and payable at their or its Principal Amount Outstanding, together with accrued interest, if any of the following shall occur (each an Event of Default): (a) (b) (c) (d) (e) (f) default is made for a period of 14 calendar days or more in the payment of the principal or interest on the Notes of the Relevant Class when due in accordance with these Conditions (save for any interest deferred in accordance with Condition 5(f) (Subordination by Deferral)); or the Issuer fails to perform any of its other obligations binding on it under the Notes of the Relevant Class, the Trust Deed, the Paying Agency Agreement or the Pledge Agreements and, except where such failure, in the reasonable opinion of the Security Trustee, is incapable of remedy, such default continues for a period of 30 days after written notice by the Security Trustee to the Issuer requiring the same to be remedied; or if a conservatory attachment (conservatoir beslag) or an executory attachment (executoriaal beslag) on any major part of the Issuer s assets is made and not discharged or released within a period of 30 days of it first being made; or if any order shall be made by any competent court or other authority or a resolution passed for the dissolution or liquidation of the Issuer or for the appointment of a liquidator or receiver of the Issuer or of all or substantially all of its assets; or the Issuer has taken any winding-up resolution, has been declared bankrupt (failliet), or has applied for general settlement or composition with creditors (akkoord), controlled management or suspension of payments (surseance van betaling); or it is or will become unlawful for the Issuer to perform or comply with any of its obligations under or in respect of the Notes, the Trust Deed or Security, 115

116 provided that, if more than one Class of Notes is outstanding, no Enforcement Notice may or shall be given by the Security Trustee to the Issuer in respect of any Class of Notes ranking junior to the Relevant Class regardless of whether an Extraordinary Resolution is passed by the holder of such Class or Classes of Notes ranking junior to the Relevant Class, unless an Enforcement Notice in respect of the Relevant Class has been given by the Security Trustee. In exercising its discretion as to whether or not to give an Enforcement Notice to the Issuer in respect of the Relevant Class, the Security Trustee shall not be required to have regard to the interests of the holders of any Class of Notes ranking junior to the Relevant Class. 12. Enforcement and Non-Petition (a) At any time after the obligations under the Notes of any Class become due and payable, the Security Trustee may, at its discretion and without further notice, take such steps and / or institute such proceedings as it may think fit to enforce the terms of the Trust Deed, the Pledge Agreements and the Notes, but it need not take any such proceedings unless: it shall have been directed by an Extraordinary Resolution of the holders of the Relevant Class; and it shall have been indemnified to its satisfaction. (b) (c) The Noteholders may not proceed directly against the Issuer unless the Security Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing. The Noteholders and the Security Trustee may not institute against, or join any person in instituting against, the Issuer any bankruptcy, reorganisation, arrangement, insolvency or liquidation proceeding until the expiry of a period of at least one year after the latest maturing Note has been paid in full. The Noteholders accept and agree that the only remedy against the Issuer after any of the Notes have become due and payable pursuant to Condition 11 (Events of Default) is to enforce the Security. 13. Indemnification of the Security Trustee The Trust Deed contains provisions for the indemnification of the Security Trustee and for its relief from responsibility. The Security Trustee is entitled to enter into commercial transactions with the Issuer and / or any other party to the Transaction Documents without accounting for any profit resulting from such transaction. 14. Notices Notices to the Noteholders will be deemed to be validly given if published on the DSA website, being at the time and the website of the Issuer, being at the time or, if such website ceases to exist or the timely publication of such notice is not possible or practicable, in at least one widely circulated newspaper in the Netherlands, or otherwise in such manner as the Security Trustee shall approve. Any such notice shall be deemed to have been given on the first date of such publication. If publication as provided above is not practicable, a notice will be given in such other manner, and will be deemed to have been given at such date, as the Security Trustee shall approve. So long as the Notes are admitted to the Official List and trading on the regulated market of the Irish Stock Exchange all notices to the Noteholders will be valid if published in a manner which complies with the rules and regulations of the Irish Stock Exchange (which includes delivering a copy of such notice to the Irish Stock Exchange) and any such notice shall be deemed to have been given on the first date of such publication. 116

117 15. Meetings of Noteholders and Certificateholders (a) (b) Convening: The Trust Deed contains Provisions for Meetings of Noteholders for convening separate or combined meetings of Noteholders of any class and Provisions for Meetings of Certificateholders for convening meetings of Certificateholders to consider matters relating to the Notes and the Certificates (as applicable), including the modification of any provision of these Conditions or the Trust Deed, which modification may be made if sanctioned by an Extraordinary Resolution. Separate and combined meetings: The Trust Deed provides that: (iii) an Extraordinary Resolution which in the opinion of the Security Trustee affects the interests of the Noteholders of only one class of Notes shall be transacted at a separate meeting of the Noteholders of that class; an Extraordinary Resolution which in the opinion of the Security Trustee affects the interests of the Noteholders of more than one class of Notes but does not give rise to an actual or potential conflict of interest between the holders of one class of Notes and the holders of another class of Notes shall be transacted either at separate meetings of the Noteholders of each such class or at a single meeting of the Noteholders of all such classes of Notes, as the Security Trustee shall determine in its absolute discretion; and an Extraordinary Resolution which in the opinion of the Security Trustee affects the Noteholders of more than one class of Notes and gives rise to any actual or potential conflict of interest between the Noteholders of one class of Notes and the Noteholders of any other class of Notes shall be transacted at separate meetings of the Noteholders of each such class. (c) (d) Request from Noteholders: A meeting of Noteholders of a particular class may be convened by the Trustee or the Issuer at any time and must be convened by the Security Trustee (subject to its being indemnified to its satisfaction) upon the request in writing of Noteholders of a particular class holding not less than 10 per cent. in aggregate of the Principal Amount Outstanding of the outstanding Notes of that class. However, so long as no Event of Default has occurred and is continuing, the Noteholders are not entitled to instruct or direct the Issuer to take any action, either directly or indirectly through the Security Trustee, without consent of the Issuer and, if applicable, certain other parties pursuant to any relevant Transaction Documents, unless the Issuer has an obligation to take such action under the relevant Transaction Documents. Quorum: The quorum at any meeting convened to vote on: an Extraordinary Resolution, other than regarding a Basic Terms Change, relating to a meeting of a particular class or classes of the Notes will be one or more persons holding or representing, in aggregate, more than 50 per cent. of the Principal Amount Outstanding of the outstanding Notes in that class or those classes or, at any adjourned meeting, one or more persons holding or representing, in aggregate, not less than 25 per cent. of the Principal Amount Outstanding of the outstanding Notes so held or represented in such class or those classes; and an Extraordinary Resolution relating to a Basic Terms Change (which must be proposed separately to each class of Noteholders) will be one or more persons holding or representing not less than 75 per cent. in aggregate of the Principal Amount Outstanding of the outstanding Notes in the relevant class or classes or, at any adjourned meeting, one or more persons holding or representing more than 50 per cent. in aggregate of the Principal Amount Outstanding of the outstanding Notes in the relevant class or classes. 117

118 (e) Relationship between classes: In relation to each class of Notes: (iii) (iv) no Extraordinary Resolution involving a Basic Terms Change that is passed by the holders of one class of Notes shall be effective unless it is sanctioned by an Extraordinary Resolution of the holders of each of the other classes of Notes (to the extent that there are outstanding Notes in each such other classes); no Extraordinary Resolution to approve any matter other than a Basic Terms Change of any class of Notes shall be effective unless it is sanctioned by an Extraordinary Resolution of the holders of the Most Senior Class, as applicable, unless the Security Trustee is of the opinion that it would not be materially prejudicial to the interests of the holders of the Most Senior Class, as applicable; any resolution passed at a Meeting of Noteholders of one or more classes of Notes duly convened and held in accordance with the Trust Deed shall be binding upon all Noteholders of such class or classes, whether or not present at such Meeting and whether or not voting; and except in the case of a meeting relating to a Basic Terms Change, any resolution passed at a meeting of the holders of the Most Senior Class, as applicable, duly convened and held as aforesaid shall also be binding upon the holders of all the other classes of Notes. (f) Resolutions in writing or by Electronic Consents: A Written Resolution shall take effect as if it were an Extraordinary Resolution. Any resolution passed by way of Electronic Consents given by holders through the relevant clearing system(s) in accordance with these Conditions and the Trust Deed shall also be binding on the relevant Noteholders. 16. Modifications, waiver, authorisations (a) (b) The Security Trustee may agree with the Issuer and the other parties to any Transaction Document, without the consent of the Noteholders, Certificateholders or any other Secured Creditor (that is not a party to the relevant document, as applicable), to any modification of any of the provisions of the Conditions, Certificate Conditions, Trust Deed, the Notes, the Certificates and any other Transaction Document which is of a formal, minor or technical nature or is made to correct a manifest error, and except for a Basic Terms Change, any other modification, and any waiver or authorisation of any breach or proposed breach, of any of the provisions of the Conditions, Certificate Conditions, Trust Deed, the Notes, the Certificates or any other Transaction Document, and any consent, including to assignment, novation or the transfer of the rights and / or obligations, as applicable under a Transaction Document by the relevant counterparty to a successor, which is in the opinion of the Security Trustee not materially prejudicial to the interests of the Most Senior Class, as applicable, provided that in the case of only, (a) the Security Trustee has notified the Credit Rating Agencies and (b) a Credit Rating Agency Confirmation is available in connection with such modification, authorisation or waiver. Any such modification under or modification, waiver or authorisation under above, shall be binding on the Noteholders, Certificateholders or any other Secured Creditor, and, if the Security Trustee so requires, such modification, waiver or authorisation shall be notified to the Noteholders in accordance with Condition 14 (Notices) as soon as practicable after it has been made or granted, as applicable. In addition, the Security Trustee may agree, without the consent of the Noteholders, Certificateholders and any other Secured Creditor (that is not a party to the relevant document, as applicable), to any consequential modification of the Conditions, Certificate Conditions, Trust Deed, the Notes, the Certificates or any other Transaction Document which is required or necessary in relation to the relevant modification, waiver or authorisation. Except in the case of a Basic Terms Change, the Security Trustee shall agree with the Issuer and the other parties to any Transaction Document, without the consent of the Noteholders, the 118

119 Certificateholders and any other Secured Creditor (that is not party to such document, as applicable), to any modification of the relevant Transaction Documents in order to enable the Issuer to comply with any obligation which applies to it under Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies, and in particular the third subparagraph of Article 8b(3) thereof and Commission Delegated Regulation (EU) 2015/3 (including, any associated regulatory technical standards and advice, guidance or recommendations from relevant supervisory regulators) (the CRA3 Requirements), including any requirements imposed by any proposed STS Regulation or any other obligation which applies to it under the CRA3 Requirements, the STS Regulation and / or any new regulatory requirements, subject to receipt by the Security Trustee of a certificate of the Issuer certifying to the Security Trustee that the amendments requested by the Issuer are to be made solely for the purpose of enabling the Issuer to satisfy its requirements under the CRA3 Requirements, provided that the Security Trustee shall not be obliged to agree to any modification which, in the reasonable opinion of the Security Trustee, would have the effect of exposing the Security Trustee to any additional liability or adding to or increasing the obligations, liabilities or duties, or decreasing the protections, of the Security Trustee in respect of the Notes, the Certificates, the relevant Transaction Documents, the Conditions and / or the Certificate Conditions. Each other party to any relevant Transaction Document shall cooperate to the extent reasonably practicable with the Issuer in amending such Transaction Documents to enable the Issuer to comply with the CRA3 Requirements and / or the STS Regulation and / or new regulatory requirements. (c) Except in the case of a Basic Terms Change, the Security Trustee shall agree with the Issuer and the other parties to any Transaction Document, without the consent of the Noteholders, Certificateholders and any other Secured Creditor (that is not a party to such document, as applicable), to any modification of any Transaction Document for the purpose of complying with, or implementing or reflecting, any change in the criteria of one or more of the Credit Rating Agencies which may be applicable from time to time, provided that in relation to any such modification: the Issuer certifies in writing to the Security Trustee that such modification is necessary to comply with such criteria or, as the case may be, is solely to implement and reflect such criteria; and in the case of any modification to a Transaction Document proposed by any of the Collection Foundation Account Bank or the Issuer Account Bank in order (x) to remain eligible to perform its role in such capacity in conformity with such criteria and / or (y) to avoid taking action which it would otherwise be required to take to enable it to continue performing such role: A. the party proposing the modification to a Transaction Document, certifies in writing to the Issuer and the Security Trustee that such modification is necessary for the purposes described in paragraph (x) and / or (y) above (and in the case of a certification provided to the Issuer, the Issuer shall certify to the Security Trustee that it has received the same from such party); B. a. the party proposing the modification to a Transaction Document, if possible and if necessary with the cooperation of the Issuer, obtains from each of the Credit Rating Agencies written confirmation (or certifies in writing to the Issuer and the Security Trustee that it has been unable to obtain such confirmation) that such modification would not result in a downgrade, withdrawal or suspension of the then current ratings assigned to any Class of Notes by such Credit Rating Agency and would not result 119

120 in any Credit Rating Agency placing any Notes on rating watch negative (equivalent) and, if relevant, delivers a copy of each such confirmation to the Issuer and the Security Trustee; or b. the Issuer certifies in writing to the Security Trustee that the Credit Rating Agencies have been informed of the proposed modification and none of the Credit Rating Agencies has indicated within 30 Business Days after being informed thereof that such modification would result in (x) a downgrade, withdrawal or suspension of the then current ratings assigned to any Class of the Notes by such Credit Rating Agency or (y) such Credit Rating Agency placing any Notes on rating watch negative (or equivalent); and C. the party proposing the modification to a Transaction Document pays all costs and expenses (including legal fees) incurred by the Issuer and the Security Trustee or any other party which is a party to such Transaction Document in connection with such modification. (d) Except in the case of a Basic Terms Change, the Security Trustee shall agree with the Issuer and the other parties to any Transaction Document, without the consent of the Noteholders, Certificateholders or any other Secured Creditor (that is not a party to such document, as applicable), to any modification of any Transaction Document for the purpose of complying with any changes in the requirements of Article 405 of the CRR, Article 17 of the AIFMD, Article 51 of the AIFMR or Section 15G of the Exchange Act, as added by section 941 of the Dodd-Frank Act, after the Closing Date, including as a result of the adoption of regulatory technical standards in relation to the CRR or the AIFMR or any other risk retention legislation or regulations or official guidance in relation to any such legislation or regulation, provided that the party proposing the modification to a Transaction Document, supported by the Issuer (provided the Issuer is of the view (acting reasonably) that such proposal is not prejudicial to its interest) if requested by the party proposing the modification, certifies to the Security Trustee in writing that such modification is required solely for such purpose and has been drafted solely to such effect; (the certificate to be provided by the Issuer, Collection Foundation Account Bank, the Issuer Account Bank and / or the relevant party to the Transaction Document, as the case may be, under Condition 16(b), 16(c), 16(c)(A) or 16(c)(B)(a) above being a Modification Certificate), provided that: (iii) (iv) (v) at least 30 calendar days prior written notice of any such proposed modification has been given to the Security Trustee; the Modification Certificate in relation to such modification shall be provided to the Security Trustee both at the time the Security Trustee is notified of the proposed modification and on the date that such modification takes effect; the consent of each Secured Creditor which is party to the relevant Transaction Document or whose ranking in any Priority of Payments is affected has been obtained; the Issuer certifies in writing to the Security Trustee (which certification may be in the Modification Certificate) that the Issuer has provided at least 30 calendar days notice to the Noteholders of each Class of the proposed modification in accordance; with Condition 14 (Notices) and by publication on Bloomberg on the Company News screen relating to the Notes, and Noteholders representing at least 10 per cent. of the aggregate Principal Amount Outstanding of the Most Senior Class, as applicable, have not 120

121 contacted the Issuer or Paying Agent in writing (or otherwise in accordance with the then current practice of any applicable clearing system through which such Notes may be held) within such notification period notifying the Issuer or Paying Agent that such Noteholders do not consent to the modification; (vi) (vii) the party proposing the modification to a Transaction Document pays all costs and expenses (including, legal fees) incurred by the Issuer and the Security Trustee or any other party which is a party to such Transaction Document in connection with such modification; and each of the Issuer and the Security Trustee is entitled to incur reasonable costs to obtain advice from external advisers in relation to such proposed amendment. (e) If Noteholders representing at least 10 per cent. of the aggregate Principal Amount Outstanding of the Most Senior Class, as applicable, have notified the Paying Agent or the Issuer in writing (or otherwise in accordance with the then current practice of any applicable clearing system through which such Notes may be held) within the notification period referred to above that they do not consent to the modification, then such modification will not be made unless an Extraordinary Resolution of the Noteholders of the Most Senior Class, as applicable, is passed in favour of such modification in accordance with this Condition 15 (Meetings of Noteholders and Certificateholders). Objections made in writing other than through the applicable clearing system must be accompanied by evidence to the Issuer s satisfaction (having regard to prevailing market practices) of the relevant Noteholder s holding of the Notes. (f) Notwithstanding anything to the contrary in this Condition 16 or any Transaction Document: when implementing any modification, waiver or authorisation under this Condition 16 other than 16(a) (except to the extent the Security Trustee considers that the proposed modification, waiver or authorisation to be a Basic Terms Change), the Security Trustee shall not consider the interests of the Noteholders, or Certificateholders, or any other Secured Creditor, or any other person, and shall act and rely solely and without further investigation on any certificate or evidence provided to it by the Issuer or the relevant party to any Transaction Document, as the case may be, pursuant to this Condition 16 and shall not be liable to the Noteholders or Certificateholders, or any other Secured Creditor or any other person for so acting or relying, irrespective of whether any such modification, waiver or authorisation is or may be materially prejudicial to the interests of any such person; and the Security Trustee shall not be obliged to agree to any modification, waiver or authorisation which, in the sole opinion of the Security Trustee would have the effect of exposing the Security Trustee to any liability against which it has not be indemnified to its satisfaction or increasing the obligations or duties, or decreasing the rights or protections, of the Security Trustee in the Transaction Documents and / or these Conditions. (g) Any such modification, waiver or authorisation shall be binding on all Noteholders and shall be notified by the Issuer as soon as reasonably practicable to: (iii) so long as any of the Notes rated by the Credit Rating Agencies remains outstanding, each Credit Rating Agency; the Secured Creditors; and the Noteholders in accordance with Condition 14 (Notices) and Certificateholders in accordance with Condition 14 (Notices) of the Certificate Conditions. 121

122 17. Replacement of Notes and Coupons If any Note or Coupon is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the office of the Paying Agent upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Notes or Coupons must be surrendered, in the case of Notes together with all unmatured Coupons appertaining thereto, in the case of Coupons together with the Note and all unmatured Coupons to which they appertain (mantel en blad), before replacements will be issued. 18. Governing Law and Jurisdiction (a) (b) The Notes and Coupons are governed by, and will be construed in accordance with, Dutch law. Any disputes arising out of or in connection with the Notes and Coupons, including, disputes relating to any non-contractual obligations arising out of or in relation to the Notes and Coupons, shall be submitted to the exclusive jurisdiction of the competent courts of Amsterdam, the Netherlands. 122

123 4.2 Terms and Conditions of the Certificates 1. General If Certificates are issued in definitive form, the Certificate Conditions will be as set out below. The Conditions will be endorsed on each Definitive Certificate if they are issued. While the Certificates remain in global form, the same terms and conditions govern the Certificates, except to the extent that they are not appropriate for Certificates in global form. See further Section 4.3 (Form of Notes and Certificates) below. The issue of 1000 R1 Certificates (the R1 Certificates) and 1000 R2 Certificates (the R2 Certificates and together with the R1 Certificates, the Certificates) was authorised by a resolution of the managing director of the Issuer passed on or about 16 January The Certificates are issued under the Trust Deed on the Closing Date. Unless otherwise defined in these Certificate Conditions, words and expressions used in these Certificate Conditions are defined in a master definitions and common terms agreement dated the Signing Date between, among others, the Issuer, the Security Trustee and the Seller as amended from time to time (the Master Definitions and Common Terms Agreement). Such words and expression shall, except where the context requires otherwise, have the same meanings in these Certificate Conditions. If the terms or definitions in the Master Definitions and Common Terms Agreement would conflict with the terms and definitions used in these Certificate Conditions, the terms and definitions of these Certificate Conditions shall prevail. The statements in these Certificate Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed, which will include the forms of the Certificates, and the Temporary Global Certificates and the Permanent Global Certificates, the Paying Agency Agreement, (iii) the Servicing Agreement, (iv) the Parallel Debt Agreement and (v) the Pledge Agreements. Copies of the Trust Deed, Paying Agency Agreement, the Parallel Debt Agreement, the Pledge Agreements, and the Master Definitions and Common Terms Agreement and certain other Transaction Documents (see further Section 8 (General) below) are available for inspection, free of charge, by Certificateholders and prospective Certificateholders at the specified office of the Paying Agent and the present office of the Security Trustee, being at the date hereof Prins Bernhardplein 200, 1097 JB Amsterdam, the Netherlands, and electronic from upon request at securitisation@intertrustgroup.com. The Certificateholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed, the Paying Agency Agreement, the Parallel Debt Agreement, the Pledge Agreements and the Master Definitions and Common Terms Agreement. 2. Form, Denomination and Title Form The Certificates will be in bearer form serially numbered, in denominations of EUR 100,000. Under Dutch law, the valid transfer of the Certificates requires, among other things, delivery (levering) of such Certificates. The Issuer, the Security Trustee and the Paying Agent may, to the fullest extent permitted by law, treat the holder of any Certificate as its absolute owner for all purposes (whether or not payment under such Certificate shall be overdue and notwithstanding any notice of ownership or writing in respect of such Certificate, or any notice of previous loss or theft of such Certificate), including payment and no person shall be liable for so treating such holder. Evidence of the signatures on and issue by the Issuer of the Certificate may be under hand or by facsimile, portable document format or any other electronic format. 123

124 For as long as the Certificates are represented by a Global Certificate and Euroclear or Clearstream, Luxembourg so permit, such Certificates will be tradeable only in the minimum authorised denomination of EUR 100,000. Certificates in definitive form, if issued, will only be printed and issued in denominations of EUR 100, Status, Priority and Security (a) (b) (c) (d) The Certificates are direct and unconditional obligations of the Issuer and rank pari passu and pro rata without any preference or priority among Certificates of the same Class. The Certificates constitute part of the consideration provided by the Issuer to the Seller for the purchase of the Mortgage Portfolio by the Issuer from the Seller. The Certificates are subordinate to the Notes and any Net WAC Additional Amount, as provided in these Certificate Conditions and the Transaction Documents. The Security for the obligations of the Issuer towards, among other things, the Certificateholders will be created pursuant to, and on the terms set out in, the Trust Deed and the Pledge Agreements, and under which, among other things, the following security rights will be created: (iii) (iv) a first ranking right of pledge by the Issuer to the Security Trustee over the Mortgage Receivables and the Beneficiary Rights and all rights ancillary to such Mortgage Receivables; a first ranking right of pledge by the Issuer to the Security Trustee over the Issuer Rights including all rights ancillary to such Issuer Rights; a first ranking right of pledge by the Issuer to the Security Trustee in respect of its rights under the Issuer Accounts against the Issuer Account Bank; and a first ranking disclosed right of repledge (herpandrecht) by the Issuer in respect of the Collection Foundation s rights over the Collection Foundation Account in favour of, among others, the Security Trustee, and, by operation of the right of repledge in favour of the Security Trustee, a second ranking disclosed right of pledge by the Collection Foundation in respect of its rights over the Collection Foundation Account in favour of, among others, the Issuer. (e) The obligations under the Certificates are secured (indirectly) by the Security. The Trust Deed contains provisions requiring the Security Trustee to have regard only to the interests of the Certificateholders as a whole and not to consequences of such exercise upon individual Certificateholders. In addition, the Security Trustee shall have regard to the interest of the other Secured Creditors. In case of a conflict of interest between the Secured Creditors, the ranking set out in the Post-Enforcement Priority of Payments determines which interest of which Secured Creditor prevails. 4. Covenants of the Issuer As long as any of the Certificates remain outstanding, the Issuer shall carry out its business in accordance with proper and prudent Netherlands business practice and in accordance with the requirements of Dutch law and accounting practice, and shall not, except to the extent permitted by the Transaction Documents or with the prior written consent of the Security Trustee: (a) carry out any business other than as described in the Prospectus and as contemplated in the Transaction Documents; 124

125 (b) (c) (d) (e) (f) (g) (h) (j) (k) (l) incur any indebtedness in respect of borrowed money whatsoever or give any guarantee or indemnity in respect of any indebtedness except as contemplated in the Transaction Documents; create or promise to create any mortgage, charge, pledge, lien or other security interest whatsoever over any of its assets, or use, invest, sell, transfer or otherwise dispose of or grant any options or rights to any part of its assets except as contemplated by the Transaction Documents; consolidate or merge with any other person or convey or transfer its properties or assets substantially or as an entirety to any person; permit the validity or effectiveness of the Transaction Documents, or the priority of the security created thereby or pursuant thereto to be amended, terminated, waived, postponed or discharged, or permit any person whose obligations form part of such security rights to be released from such obligations or consent to any waiver except as contemplated in the Transaction Documents; have any employees or premises or have any subsidiary or subsidiary undertaking; have an interest in any bank account other than the Issuer Accounts unless all rights in relation to such account will have been pledged to the Security Trustee as provided in Certificate Condition 3(d)(iii); take any action which will cause its centre of main interest within the meaning of the insolvency regulation to be located outside the Netherlands; amend, supplement or otherwise modify its articles of association or other constitutive documents; pay any dividend or make any other distribution to its shareholder(s), other than in accordance with the applicable Priority of Payments or issue any further shares; engage in any activity whatsoever which is not incidental to or necessary in connection with, any of the activities which the relevant Transaction Documents provide or envisage that the Issuer will engage in; and purchase or otherwise acquire any Certificates. 5. Certificate Payments (a) Right to Certificate Payments In these Certificate Conditions: Certificate Payment Amount means, for each Certificate on any date on which amounts are to be applied in accordance with the relevant Priorities of Payments, the Certificate Payment for that date, divided by 1000; and Certificate Payment means: the amount (if any) by which the Available Revenue Funds exceeds the amounts required to satisfy items (a) to (r) (inclusive) of the Revenue Priority of Payments; and 125

126 the amount (if any) by which the Available Principal Funds exceeds the amounts required to satisfy items (a) to (k) (inclusive) of the Redemption Priority of Payments. The holders of the R1 Certificates will have the right to 100 per cent. of (and the holders of the R2 Certificates will have no right to) any Certificate Payment on any Notes Payment Date before the Class Z Notes have been redeemed in full in accordance with the relevant Priority of Payments, and on and after the date of such redemption of the Class Z Notes in full, the holders of the R2 Certificates will have the right to 100 per cent. of (and the holders of the R1 Certificates will have no right to) any Certificate Payment. (b) Certificate Payments Certificate Payments will be payable on each Notes Payment Date, subject to and in accordance with the relevant Priority of Payments, Certificate Condition 10 (Limited recourse) and the other Certificate Conditions. (c) Determination of Certificate Payment The Issuer Administrator shall, as soon as practicable after a.m. (Central European Time) on each Interest Determination Date but in no event later than the third Business Day after such date, determine the Certificate Payment and, in respect of each Certificate, the Certificate Payment Amount. (d) Publication of Certificate Payments and Certificate Payment Amount The Issuer Administrator shall cause the Certificate Payment and Certificate Payment Amount (if any) for each Notes Payment Date to be notified to the Issuer, the Security Trustee and the Paying Agent and to be published in accordance with Certificate Condition 14 (Notices) as soon as possible after their determination and in no event later than the second Business Day after such date. The Certificate Payment and Certificate Payment Amount may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without notice in the event of an extension or shortening of the Interest Period. (e) Determination by the Security Trustee The Security Trustee may, without liability therefor, if the Issuer Administrator defaults at any time in its obligation to determine the Certificate Payment and Certificate Payment Amount (if any) in accordance with the above provisions and the Security Trustee has been notified of this default, determine or cause to be determined the Certificate Payment and Certificate Payment Amount (if any), in the manner provided in this Certificate Condition 5 (Certificate Payments). Any such determination shall be deemed to be determinations made by the Issuer Administrator. (f) Notifications, etc. to be final All notifications, opinions, determinations, certificates, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Certificate Condition 5 (Certificate Payments), whether by the Issuer Administrator or the Security Trustee, will (in the absence of wilful default, gross negligence or fraud) be binding on the Issuer, the Reference Agent, the Security Trustee, the Paying Agent and all Certificateholders and (in the absence of wilful default, gross negligence or fraud), no liability to the Issuer or the Certificateholder shall attach to the Issuer Administrator, the Paying Agent or, if applicable, the Security Trustee in connection with the exercise or non-exercise by any of them of their powers, duties and discretions under this Certificate Condition 5 (Certificate Payments). 126

127 (g) Termination of payments and cancellation of Certificates Following the redemption in full of the Notes and the realisation of the Pledged Assets, and payment of the proceeds on accordance with the relevant Priorities of Payments, no more Certificate Payments will be made by the Issuer and the Certificates shall be cancelled. 6. Mortgage Portfolio Purchase Option (a) Under these Certificate Conditions and the Trust Deed, the Mortgage Portfolio Option Holder has an option (but not an obligation) (the Mortgage Portfolio Purchase Option) to require the Issuer to: sell and assign to the Mortgage Portfolio Option Holder (or its nominee) the Mortgage Portfolio; and serve all relevant notices and take all steps (including carrying out requisite registrations and recordings) in order to vest or transfer the Mortgage Portfolio to the Mortgage Portfolio Option Holder (or its nominee), in each case, subject to the terms of these Certificate Conditions and the Trust Deed. (b) (c) The Mortgage Portfolio Purchase Option may be exercised on the First Optional Redemption Date or on the Issuer Sale Trigger Date, by notice to the Issuer (with a copy to the Security Trustee, the Seller, the Liquidation Agent and the Credit Rating Agencies), and if the Mortgage Portfolio Purchase Option is not exercised on any such date, it will expire. In this Certificate Condition, Mortgage Portfolio Option Holder means: where the R1 Certificates and R2 Certificates are represented by Definitive Certificates, the holder of more than (x) 50 per cent. of the R1 Certificates and (y) 50 per cent. of the R2 Certificates, or where the R1 Certificates and R2 Certificates are represented by Global Certificates, any indirect participant who holds the beneficial interest in more than (x) 50 per cent. of the R1 Certificates and (y) 50 per cent. of the R2 Certificates; or where no person holds more than 50 per cent. of the R1 Certificates and 50 per cent. of the R2 Certificates, or beneficial interest in more than 50 per cent. of the R1 Certificates and 50 per cent. of the R2 Certificates, as applicable, the person who holds the most number of (x) each of the R1 Certificates and (y) the R2 Certificates, or beneficial interest in the most number of (x) each of the R1 Certificates and (y) the R2 Certificates. 7. Payment (a) Payment of Certificate Payment Amounts Payments under the Certificates will be made upon presentation of the Certificate at any specified office of the Paying Agent by transfer to a euro account maintained by the payee with a bank in the Netherlands. All such payments will be subject in all cases to any other applicable fiscal or other laws and regulations in the place of payment or other laws and regulations to which the Issuer agrees to be subject and the Issuer will be liable for any taxes or duties of whatever nature imposed or levied by such laws, regulations or agreements. (b) No Payment on non-business Day If the relevant Notes Payment Date is not a day on which banks are open for business in the place of presentation of the relevant Certificate (a Local Business Day) the holder of the Certificate shall not 127

128 be entitled to payment until the next following Local Business Day, or to any interest or other payment in respect of such delay, provided that in the case of payment by transfer to a euro account as referred to above, the Paying Agent shall not be obliged to credit such account until the day on which banks in the place of such account is open for business immediately following the day on which banks are open for business in the Netherlands. The name of the Paying Agent and details of its offices are set out on the last page of the Prospectus. (c) Change of Paying Agent The Issuer reserves the right at any time to vary or terminate the appointment of the Paying Agent and to appoint additional or other paying agents provided that no paying agents located in the United States of America will be appointed. Notice of any termination or appointment of a Paying Agent will be given to the Certificateholders in accordance with Certificate Condition 14 (Notices). 8. Taxation (a) General All payments under the Certificates will be made without withholding of, or deduction for, or on account of any present or future taxes, duties, assessments or charges of whatsoever nature imposed or levied by or on behalf of the Netherlands or any other jurisdiction, any authority therein or thereof having power to tax unless the withholding or deduction of such taxes, duties, assessments or charges are required by law. In that event, the Issuer will make the required withholding or deduction of such taxes, duties, assessments or charges for the account of the Certificateholders, as the case may be, and shall not pay any additional amounts to such Certificateholders. (b) FATCA Withholding Sections 1471 through 1474 of the U.S. Internal Revenue Code of 1986 impose a new reporting regime and, potentially, a 30 per cent. withholding tax with respect to certain payments from sources within the United States, foreign passthru payments made to certain non-u.s. financial institutions that do not comply with this new reporting regime, and (iii) payments to certain investors that do not provide identification information with respect to interests issued by a participating non- U.S. financial institution. If an amount in respect of FATCA Withholding were to be deducted or withheld either from amounts due to the Issuer or from payments made in respect of the Certificates, neither the Issuer nor any paying agent nor any other person would, pursuant to the conditions of the Certificates, be required to pay additional amounts as a result of the deduction or withholding. 9. Prescription Claims against the Issuer for payment in respect of the Certificates shall become prescribed and become void unless made within five years from the date on which such payment first becomes due. 10. Limited recourse (a) (b) Notwithstanding any other Certificate Condition or provision of any Transaction Document, all obligations of the Issuer to the Certificateholders are limited in recourse to the property, assets and undertaking of the Issuer and which is the subject of the Security. In the event that all the Security in respect of the Certificates has been fully enforced and the proceeds of such enforcement and any other amounts received by the Security Trustee, after payment in full of all other claims ranking under the Trust Deed in priority to any Class of the 128

129 Certificates, as applicable, are insufficient to pay in full any amounts due in respect of such Class, as applicable, the Certificateholders of the relevant Class, as applicable, shall have no further claim against the Issuer or the Security Trustee in respect of any such unpaid amounts, and such unpaid amounts shall on the day following such application in full be deemed to be discharged in full and any relevant payment rights shall be deemed to cease. 11. Certificates Events of Default Provided all the Notes have been redeemed in full, (x) the Security Trustee at its discretion may, or, (y) if so directed in writing by the holders of at least 25 per cent of the Certificates in number or if so directed by an Extraordinary Resolution of the Certificateholders (subject, in each case, to being indemnified to its satisfaction) shall (but in the case of the occurrence of any of the events mentioned in (b) below, only if the Security Trustee shall have certified in writing to the Issuer that such an event is, in its opinion, materially prejudicial to the Certificateholders) give an Enforcement Notice to the Issuer that that any Certificate Payments pursuant to the Certificates are immediately due and payable in any of the following events (each a Certificates Event of Default): (a) (b) (c) (d) (e) (f) default is made for a period of 14 calendar days or more in the payment of any amount due under the Certificates; or the Issuer fails to perform any of its other obligations under these Certificate Conditions or the Trust Deed, the Paying Agency Agreement or the Pledge Agreements and, except where such failure, in the reasonable opinion of the Security Trustee, is incapable of remedy, such default continues for a period of 30 days after written notice by the Security Trustee to the Issuer requiring the same to be remedied; or if a conservatory attachment (conservatoir beslag) or an executory attachment (executoriaal beslag) on any major part of the Issuer s assets is made and not discharged or released within a period of 30 days of it first being made; or if any order shall be made by any competent court or other authority or a resolution passed for the dissolution or liquidation of the Issuer or for the appointment of a liquidator or receiver of the Issuer or of all or substantially all of its assets; or the Issuer has taken any winding-up resolution, has been declared bankrupt (failliet), or has applied for general settlement or composition with creditors (akkoord), controlled management or suspension of payments (surseance van betaling); or it is or will become unlawful for the Issuer to perform or comply with any of its obligations under or in respect of the Certificates, the Trust Deed or Security. Upon the service of a notice by the Security Trustee in accordance with this Certificate Condition 11 (Events of Default) above, any Certificate Payments pursuant to the Certificates shall (without further action or formality) be immediately become due and payable. 12. Enforcement and non-petition (a) At any time after the obligations under the Certificates become due and payable, the Security Trustee may, at its discretion and without further notice, take such steps and / or institute such proceedings as it may think fit to enforce the terms of the Trust Deed, the Pledge Agreements, the Notes and the Certificates, but it need not take any such proceedings unless: all of the Notes have been redeemed in full; 129

130 (iii) the Security Trustee shall have been so directed by an Extraordinary Resolution of the Certificates or directed in writing by the holders of at least 25 per cent. in number of the Certificates; and in all cases, it shall have been indemnified to its satisfaction. (b) (c) The Certificateholders may not proceed directly against the Issuer unless the Security Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing. The Certificateholders and the Security Trustee may not institute against, or join any person in instituting against, the Issuer any bankruptcy, reorganisation, arrangement, insolvency or liquidation proceeding until the expiry of a period of at least one year after all amount due under all the Certificates have been paid in full. The Certificateholders accept and agree that the only remedy against the Issuer after any of the Notes have become due and payable pursuant to Certificate Condition 11 (Events of Default) is to enforce the Security. 13. Indemnification of the Security Trustee The Trust Deed contains provisions for the indemnification of the Security Trustee and for its relief from responsibility. The Security Trustee is entitled to enter into commercial transactions with the Issuer and / or any other party to the Transaction Documents without accounting for any profit resulting from such transaction. 14. Notices Notices to the Certificateholders will be deemed to be validly given if published on the DSA website, being at the time and the website of the Issuer, being at the time or, if such website ceases to exist or the timely publication of such notice is not possible or practicable, in at least one widely circulated newspaper in the Netherlands, or otherwise in such manner as the Security Trustee shall approve. Any such notice shall be deemed to have been given on the first date of such publication. If publication as provided above is not practicable, a notice will be given in such other manner, and will be deemed to have been given at such date, as the Security Trustee shall approve. 15. Meetings of Certificateholders (a) (b) Convening: The Trust Deed contains Provisions for Meetings of Noteholders for convening separate or combined meetings of Noteholders of any class and Provisions for Meetings of Certificateholders for convening meetings of Certificateholders to consider matters relating to the Notes and the Certificates (as applicable), including the modification of any provision of these Certificate Conditions or the Trust Deed, which modification may be made if sanctioned by an Extraordinary Resolution. Request from Noteholders or Certificateholders: A meeting of Certificateholders of each Class may be convened by the Security Trustee or the Issuer at any time and shall be convened by the Security Trustee (subject to its being indemnified to its satisfaction) upon the request in writing of Certificateholders holding not less than 10 per cent. in number of the relevant Class of Certificates then in issue. However, so long as no Certificates Event of Default has occurred and is continuing, the Certificateholders are not entitled to instruct or direct the Issuer to take any action, either directly or indirectly through the Security Trustee, without consent of the Issuer and, if applicable, certain other parties pursuant to any relevant Transaction Documents, unless the Issuer has an obligation to take such action under the relevant Transaction Documents. 130

131 (c) Quorum: The quorum at any meeting convened to vote on: an Extraordinary Resolution, other than regarding a Basic Terms Change, relating to a meeting of the Certificates will be one or more persons holding or representing, in aggregate, more than 50 per cent. in number of each Class of the Certificates then in issue or, at any adjourned meeting, one or more persons present and holding or representing not less than 25 per cent. in number of each Class of the Certificates then in issue; and an Extraordinary Resolution relating to a Basic Terms Change (which must be proposed separately to each class of Certificateholders) will be one or more persons holding or representing not less than 75 per cent. in number of each Class of the Certificates then in issue or, at any adjourned meeting, one or more persons holding or representing more than 50 per cent. in number of each Class of the Certificates then in issue. (d) Relationship between Noteholders and Certificateholders: In relation to each class of Notes and the Certificates: (iii) (iv) (v) subject to Certificate Condition 16(d)(v), no Extraordinary Resolution involving a Basic Terms Change that is passed by the holders of any Class of the Certificates shall, to the extent there are Notes outstanding, be effective unless it is sanctioned by an Extraordinary Resolution of the holders of each class of Notes then outstanding in accordance with Certificate Condition 15 (Meetings of Certificateholders) unless the Security Trustee is of the opinion that it would not be materially prejudicial to the interests of the holders of the outstanding Notes; no Extraordinary Resolution to approve any matter other than a Basic Terms Change that is passed by the holders of any Class of the Certificates shall be effective unless it is sanctioned by an Extraordinary Resolution of the holders of each class of Notes then outstanding in accordance with Certificate Condition 15 (Meetings of Certificateholders) unless the Security Trustee is of the opinion that it would not be materially prejudicial to the interests of the holders of the outstanding Notes; any resolution passed at a Meeting of Certificateholders duly convened and held in accordance with the Trust Deed shall be binding upon all of the Certificateholders, whether or not present at such Meeting and whether or not voting; except in the case of a meeting relating to a Basic Terms Change, any resolution passed at a meeting of the holders of the Most Senior Class, as applicable, duly convened and held as aforesaid shall also be binding upon the holders of all the other classes of Notes and the Certificates; and a matter which is a Basic Terms Change affecting only the holders of a Class of the Certificates shall only require an Extraordinary Resolution of the holders of the relevant Class of Certificates then in issue and, shall not require an Extraordinary Resolution of the holders of any Class or Classes of Notes. (e) Resolutions in writing or by Electronic Consents: A Written Resolution shall take effect as if it were an Extraordinary Resolution. Any resolution passed by way of Electronic Consents given by holders through the relevant clearing system(s) in accordance with these Certificate Conditions and the Trust Deed shall also be binding on the Certificateholders. 131

132 16. Modifications, waiver, authorisations The Security Trustee may agree with the Issuer and the other parties to any Transaction Document, without the consent of the Noteholders, Certificateholders or any other Secured Creditor (that is not a party to the relevant document, as applicable), to any modification of any of the provisions of the Conditions, Certificate Conditions, Trust Deed, the Notes, the Certificates and any other Transaction Document which is of a formal, minor or technical nature or is made to correct a manifest error, and except for a Basic Terms Change, any other modification, and any waiver or authorisation of any breach or proposed breach, of any of the provisions of the Conditions, Certificate Conditions, Trust Deed, the Notes, the Certificates or any other Transaction Document, and any consent, including to assignment, novation or the transfer of the rights and / or obligations, as applicable under a Transaction Document by the relevant counterparty to a successor, which is in the opinion of the Security Trustee not materially prejudicial to the interests of the Most Senior Class, as applicable, provided that in the case of only, (a) the Security Trustee has notified the Credit Rating Agencies and (b) a Credit Rating Agency Confirmation is available in connection with such modification, authorisation or waiver. Any such modification under or modification, waiver or authorisation under above, shall be binding on the Noteholders, Certificateholders or any other Secured Creditor, and, if the Security Trustee so requires, such modification, waiver or authorisation shall be notified to the Certificateholders in accordance with Certificate Condition 14 (Notices) as soon as practicable after it has been made or granted, as applicable. In addition, the Security Trustee may agree, without the consent of the Noteholders, Certificateholders and any other Secured Creditor (that is not a party to the relevant document, as applicable), to any consequential modification of the Conditions, Certificate Conditions, Trust Deed, the Notes, the Certificates or any other Transaction Document which is required or necessary in relation to the relevant modification, waiver or authorisation. 17. Replacement of Certificates If any Certificate is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the office of the Paying Agent upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Certificate will be surrendered before replacements will be issued. 18. Governing Law and Jurisdiction (a) (b) The Certificates are governed by, and will be construed in accordance with, Dutch law. Any disputes arising out of or in connection with the Certificates, including, disputes relating to any non-contractual obligations arising out of or in relation to the Certificates, shall be submitted to the exclusive jurisdiction of the competent courts of Amsterdam, the Netherlands. 132

133 4.3 Form of Notes and Certificates Each Class or Subclass, as the case may be, of Notes and Certificates, as applicable, shall be initially represented by a Temporary Global Note and Temporary Global Certificate, as applicable in bearer form, and in respect of the Rated Notes, with Coupons attached, and, in the case of the Class A Notes in the principal amount of EUR 98,946,000, in the case of the Class B Notes in the principal amount of EUR 19,010,000, (iii) in the case of the Class C Notes in the principal amount of EUR 7,401,000, (iv) in the case of the Class D Notes in the principal amount of EUR 7,401,000, (v) in the case of the Class E Notes in the principal amount of EUR 9,038,000, (vi) in the case of the Class Z Notes in the principal amount of EUR 14,024,000, (vii) in the case of the R1 Certificates have a notional amount equal to the R1 Certificate Notional Amount and (viii) in the case of the R2 Certificates have a notional amount equal to the R2 Certificate Notional Amount. The Temporary Global Notes representing the Class A Notes will be deposited with Euroclear as Common Safekeeper for Euroclear and Clearstream, Luxembourg on or about the Closing Date. The Temporary Global Notes representing the Notes (other than the Class A Notes) and the Temporary Global Certificates representing the Certificates, as applicable will be deposited with Bank of America National Association, London Branch as Common Safekeeper for Euroclear and Clearstream, Luxembourg on or about the Closing Date. Upon deposit of each such Temporary Global Note and Temporary Global Certificate, Euroclear or Clearstream, Luxembourg as the case may be, will credit each purchaser of Notes or Certificates, as applicable, represented by such Temporary Global Note or Temporary Global Certificate with the principal amount of the relevant Class or Subclass, as the case may be, of Notes or Certificates, as applicable, equal to the principal amount thereof for which it has purchased and paid. Interests in each Temporary Global Note and Temporary Global Certificate will be exchangeable (provided certification of non-u.s. beneficial ownership by the Noteholders or Certificateholder, as applicable has been received) not earlier than the Exchange Date for interests in a Permanent Global Note and Permanent Global Certificate in bearer form, without coupons, in the principal amount of the Notes and Certificates, as applicable, of the relevant Class. On the exchange of a Temporary Global Note for a Permanent Global Note and Temporary Global Certificate for a Permanent Global Certificate of the relevant Class or Subclass, as the case may be, of Notes and Certificates, as applicable, the Permanent Global Note and the Permanent Global Certificate, as applicable, will remain deposited with Euroclear or Clearstream, Luxembourg. The Class A Notes are intended to be held in a manner which allows Eurosystem eligibility. The Class A Notes will upon issue be deposited with Euroclear or Clearstream, Luxembourg which is a CSD, but this does not necessarily mean that the Class A Notes will be recognised as Eurosystem Eligible Collateral either upon issue or at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria as amended from time to time. The other classes of Notes and Certificates are not intended to be held in a manner which allows Eurosystem eligibility. The Notes are held in book-entry form. The Global Notes and Global Certificates will be transferable by delivery. Each Permanent Global Note and Permanent Global Certificate will be exchangeable for Notes or Certificates, as applicable, in definitive form only in the circumstances described below. Such Notes or Certificates, as applicable in definitive form shall be issued in denominations of EUR 100,000 and, in relation to the Notes, in integral multiples of EUR 1,000 in excess of such denomination. Each of the persons shown in the records of Euroclear or Clearstream, Luxembourg as the holder of a Note or Certificate, as applicable, will be entitled to receive any payment made in respect of that Note or Certificate, as applicable, in accordance with the respective rules and procedures of Euroclear and Clearstream, Luxembourg. Such persons shall have no claim directly against the Issuer in respect of payments due on the Notes or Certificates, as applicable, which must be made by the holder of a Global Note or Global Certificate, as applicable, for so long as such Global Note or Global Certificate, as applicable, is outstanding. Each person must give a certificate as to non-u.s. beneficial ownership as of the date on which the Issuer is obliged to exchange a Temporary Global Note for a Permanent Global Note or a Temporary Global Certificate for a Permanent Global Certificate, as applicable, 133

134 which date shall be no earlier than the Exchange Date, in order to obtain any payment due on the Notes or the Certificates, as applicable. For so long as any Notes or Certificates, as applicable are represented by a Global Note or Global Certificate, as applicable, such Notes or Certificates, as applicable, will be transferable in accordance with the rules and procedures of Euroclear or Clearstream, Luxembourg, in the minimum authorised denomination of EUR 100,000 and, in relation to the Notes, in integral multiples of EUR 1,000 in excess of such denomination. Notes or Certificates, as applicable in definitive form, if issued, will only be printed and issued in denominations of EUR 100,000 and, in relation to the Notes, increased with any amount in excess thereof in integral multiples of EUR 1,000. All such Notes or Certificates, as applicable will be serially numbered and will be issued in bearer form and in respect of the Rated Notes, with (at the date of issue) Coupons and, if necessary, talons attached. For so long as all of the Notes or Certificates, as applicable are represented by the Global Notes or Global Certificates, as applicable and such Global Notes or Global Certificates, as applicable are held on behalf of Euroclear or Clearstream, Luxembourg, notices to Noteholders or Certificateholder, may be given by delivery of the relevant notice to Euroclear or Clearstream, Luxembourg for communication to the relevant accountholders rather than by publication as required by Condition 14 (Notices) of the Conditions or Condition 14 (Notices) of the Certificate Conditions (provided that, in the case any publication required by a stock exchange, that stock exchange agrees or, as the case may be, any other publication requirement of such stock exchange will be met). Any such notice delivered on or prior to 4.00 p.m. (local time) on a Business Day in the city in which it was delivered shall be deemed to have been given to the holder of the Global Notes or Global Certificates, as applicable on such Business Day. A notice delivered after 4.00 p.m. (local time) on a Business Day in the city in which it was delivered will be deemed to have been given to the holders of the Global Notes or Global Certificates, as applicable on the next following Business Day in such city. For so long as the Notes or Certificates, as applicable, of a particular Class or Subclass, as the case may be, are represented by a Global Note or Global Certificate, as applicable, each person who is for the time being shown in the records of Euroclear or Clearstream, Luxembourg as the holder of a particular principal amount of that Class or Subclass, as the case may be, of Notes or Certificates, as applicable, will be treated by the Issuer and the Security Trustee as a holder of such principal amount of that Class or Subclass, as the case may be, of Notes or Certificates, as applicable, and the expression Noteholder and Certificateholder, shall be construed accordingly, but without prejudice to the entitlement of the bearer of the relevant Global Note or Global Certificate, as applicable to be paid principal thereon and interest with respect thereto in accordance with and subject to its terms. Any statement in writing issued by Euroclear or Clearstream, Luxembourg as to the persons shown in its records as being entitled to such Notes or Certificates, as applicable and the respective principal amount of such Notes or Certificates, as applicable held by them shall be conclusive for all purposes. If after the Exchange Date the Notes or Certificates, as applicable become immediately due and payable by reason of accelerated maturity following an Event of Default or Certificates Event of Default, as applicable, or Euroclear or Clearstream, Luxembourg is closed for business for a continuous period of 14 calendar days (other than by reason of holiday, statutory or otherwise) or announces an intention permanently to cease business and no alternative clearance system satisfactory to the Security Trustee is available, or (iii) as a result of any amendment to, or change in the laws or regulations of the Netherlands (or of any political sub-division thereof) or of any authority therein or thereof having power to tax, or in the interpretation or administration of such laws or regulations, which becomes effective on or after the Closing Date, the Issuer or Paying Agent is or will be required to make any deduction or withholding on account of tax from any payment in respect of the Notes or Certificates, as applicable which would not be required were the Notes or Certificates, as applicable in definitive form, then the Issuer will, at its sole cost and expense, issue: 134

135 (iii) (iv) (v) (vi) (vii) (viii) Class A Notes in definitive form in exchange for the whole outstanding interest in the Permanent Global Note in respect of the Class A Notes; Class B Notes in definitive form in exchange for the whole outstanding interest in the Permanent Global Note in respect of the Class B Notes; Class C Notes in definitive form in exchange for the whole outstanding interest in the Permanent Global Note in respect of the Class C Notes; Class D Notes in definitive form in exchange for the whole outstanding interest in the Permanent Global Note in respect of the Class D Notes; Class E Notes in definitive form in exchange for the whole outstanding interest in the Permanent Global Note in respect of the Class E Notes; Class Z Notes in definitive form in exchange for the whole outstanding interest in the Permanent Global Note in respect of the Class Z Notes; R1 Certificates in definitive form in exchange for the whole outstanding interest in the Permanent Global Certificate in respect of the R1 Certificates; and R2 Certificates in definitive form in exchange for the whole outstanding interest in the Permanent Global Certificate in respect of the R2 Certificates, in each case, within 30 days of the occurrence of the relevant event. Application Dutch Savings Certificates Act in respect of any of the Class Z Notes Unless between individuals not acting in the conduct of a business or profession, each transaction regarding any of the Class Z Notes which involves the physical delivery thereof within, from or into the Netherlands, must be effected (as required by the Dutch Savings Certificates Act (Wet Inzake Spaarbewijzen) of 21 May 1985) through the mediation of the Issuer or an admitted institution of the Irish Stock Exchange and must be recorded in a transaction note which includes the name and address of each party to the transaction, the nature of the transaction and the details and serial number of the relevant Class Z Note. 135

136 4.4 Subscription and Sale Under the Subscription Agreement, the Lead Manager has agreed with the Issuer, subject to certain conditions, to purchase the Notes and Certificates at their respective issue prices, except for the Retained Notes and Retained Certificates, which the Retention Holder has agreed to purchase at the Closing Date. The Issuer has agreed to indemnify and reimburse the Lead Manager against certain liabilities and expenses in connection with the issue of the Notes and Certificates. Morgan Stanley & Co. International plc may, from time to time, sell any of the Notes and Certificates in the secondary market at variable prices, which may, in turn, affect the liquidity and price of any such Notes and Certificates in the secondary market. Morgan Stanley & Co. International plc may, from time to time, sell any of the Notes and Certificates in individually negotiated transactions at variable prices in the secondary market. Risk Retention In respect of the issue of the Notes, the Retention Holder, in its capacity as the originator within the meaning of Article 405 CRR, has separately undertaken to the Issuer, the Security Trustee, the Arranger and the Lead Manager that, for as long as the Notes are outstanding and on an ongoing basis, it will at all times retain an interest that qualifies as a material net economic interest in the securitisation transaction which, in any event, shall not be less than 5 per cent., in accordance with Article 405 of the CRR, Article 51 of the AIFMR and Article 254 of the Solvency II Regulation by holding no less than 5 per cent. of the nominal value of each Class of Notes sold or transferred to investors. The Retention Holder has separately undertaken to the Issuer, the Security Trustee, the Arranger and the Lead Manager that it will comply with the requirements set forth in Article 52(a) up to (and including) (d) of the AIFMR, Articles 408 and 409 of the CRR and (iii) Articles 254 and 256 paragraph 3 sub (a) up to (and including) sub (c) and sub (e) of the Solvency II Regulation. In addition to the information set out in and forming part of this Prospectus, the Retention Holder has undertaken to make materially relevant information available to investors with a view to such investor complying with Article 405 up to (and including) 409 of the CRR, Article 51, 52 and 53 of the AIFMR and Articles 254 and 256 of the Solvency II Regulation, which information can be obtained from the Retention Holder upon request. Each prospective Noteholder should ensure that it complies with the CRR, the AIFMR and the Solvency II Regulation to the extent such rules apply to it. In respect of the issue of the Notes and Certificates, the Retention Holder in its capacity as the sponsor within the meaning of the U.S. Risk Retention Requirements is subject to the requirement thereunder that the Retention Holder (or a majority-owned affiliate within the meaning given to such term by the U.S. Risk Retention Requirements) must retain, during the Risk Retention Period (as defined in this Prospectus), a 5 per cent. risk retention interest, which the Retention Holder intends to satisfy by retaining an eligible vertical interest in each Class of Notes and Certificates issued by the Issuer in the required amount of not less than 5 per cent. of the nominal amount of each such Class of Notes and such Certificates. The Retention Holder has separately undertaken to the Issuer, the Security Trustee, the Arranger and the Lead Manager that it will make available to the Issuer and the Security Trustee such information as required to be disclosed to holders of the Notes and the Certificates under the U.S. Risk Retention Requirements, and the Issuer will, following receipt of such information, make a copy of such information available to the holders of the Notes and the Certificates. See further Section 4.5 (Regulatory and Industry Compliance). 136

137 Prohibition of Sales to EEA Retail Investors Under the Subscription Agreement, the Lead Manager has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes to any retail investor in the EEA. For the purposes of this provision the expression retail investor means a person who is one (or more) of the following: a retail client as defined in point (11) of Article 4(1) of MiFID II; or a customer within the meaning of the Insurance Mediation Directive, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II. European Economic Area In relation to each Member State of the EEA which has implemented the Prospectus Directive (each, a Relevant Member State), the Lead Manager has represented and agreed, and each further lead manager appointed under the transaction will be required to represent and agree, that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an offer of Notes which is the subject of the offering contemplated by this Prospectus to the public in that Relevant Member State except that it may, with effect from and including the Relevant Implementation Date, make an offer of such Notes to the public in that Relevant Member State: at any time to any legal entity which is a qualified investor as defined in the Prospectus Directive; at any time to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the Lead Manager nominated by the Issuer for any such offer; or (iii) at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Notes referred to in to (iii) (inclusive) above shall require the Issuer or the Lead Manager to publish a prospectus pursuant to Article 3 of the Prospectus Directive, or supplement a prospectus pursuant to Article 16 of the Prospectus Directive. For the purposes of this provision, the expression an offer of Notes to the public in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe any of the Notes, as applicable, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State. United Kingdom The Lead Manager has represented and agreed that: it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which Section 21(1) of the FSMA would not, if the Issuer was not an authorised person, apply to the Issuer; and it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom. France The Lead Manager has represented and agree that it has not offered or sold and will not offer or sell, directly or indirectly, Notes to the public in France, and has not made and will not make any communication by any means about the offer to the public in France, and has not distributed, released or issued or caused to be distributed, released or issued and will not distribute, release or issue or cause to be distributed, released or 137

138 issued to the public in France, or used in connection with any offer for subscription or sale of the Notes to the public in France, this Prospectus, or any other offering material relating to the Notes, and that such offers, sales, communications and distributions have been and shall be made in France only to (a) authorised providers of investment services relating to portfolio management for the account of third parties (personnes fournissant le service d investissement de gestion de portefeuille pour compte de tiers) and / or (b) qualified investors (investisseurs qualifiés) or a restricted circle of investors (cercle restreint d investisseurs), in each case, acting for their own account, all as defined in, and in accordance with, Articles L.411-1, L and D to D of the French Code monétaire et financier. In addition, pursuant to Article of the Règlement Général of the French Autorité des Marchés Financiers (AMF), the Lead Manager must disclose to any investors in a private placement as described in the above that: the offer does not require a prospectus to be submitted for approval to the AMF, persons or entities mentioned in sub-paragraph 2 of paragraph II of Article L of the French Code monétaire et financier (i.e., qualified investors (investisseurs qualifiés) or a restricted circle of investors (cercle restraint d investisseurs) mentioned above) may take part in the offer solely for their own account, as provided in articles D , D , D , D , D and D of the French Code monétaire et financier and (iii) the financial instruments thus acquired cannot be distributed directly or indirectly to the public otherwise than in accordance with articles L , L , L and L to L of the French Code monétaire et financier. Italy No application has been or will be made by any person to obtain an authorization from Commissione Nazionale per le Società e la Borsa (CONSOB) for the public offering ( offerta al pubblico ) of the Notes in the Republic of Italy. Accordingly, no Notes may be offered, sold or delivered, nor may copies of this Prospectus or of any other document relating to the Notes be distributed in the Republic of Italy, except: to qualified investors (investitori qualificati), as defined pursuant to Article 100 of Legislative Decree No. 58 of 24 February 1998, as amended (the Financial Services Act) and Article 34-ter, first paragraph, letter (b) of CONSOB Regulation No of 14 May 1999, as amended from time to time (Regulation No ); or in any other circumstances where an express exemption from compliance with the rules relating to public offers of financial products ( offerta al pubblico di prodotti finanziari ) provided for by the Financial Services Act and the relevant implementing regulations (including Regulation No ). Any offer, sale or delivery of the Notes or distribution of copies of this Prospectus or any other document relating to the Notes in the Republic of Italy under or above must be made: (a) (b) (c) only by banks, investment firms ( imprese di investimento ) or financial institutions enrolled in the register provided for under Article 106 of Italian Legislative Decree no. 385 of 1 September 1993, as subsequently amended from time to time (the Italian Banking Act), in each case to the extent duly authorised to engage in the placement and / or underwriting ( sottoscrizione e/o collocamento ) of financial instruments ( strumenti finanziari ) in Italy in accordance with the Italian Banking Act, the Financial Services Act and the relevant implementing regulations; only to qualified investors ( investitori qualificati ) as set out above; and in accordance with all applicable Italian laws and regulations, including all relevant Italian securities and tax laws and regulations and any limitations as may be imposed from time to time by CONSOB or the Bank of Italy. 138

139 United States The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meaning given to them by Regulation S. The Notes are in bearer form and are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to, or for the account or benefit of, a U.S. person, except in certain transactions permitted by U.S. Treasury regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code of 1986 and Treasury regulations thereunder. The Lead Manager has agreed that it will not offer, sell or deliver the Notes as part of their distribution at any time or otherwise until 40 days after the later of the commencement of the offering or the Closing Date within the United States or to, or for the account or benefit of, U.S. persons and it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration to which it sells Notes during the distribution compliance period (as defined in Regulation S) a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meaning given to them by Regulation S under the Securities Act. In addition, until 40 days after the commencement of the offering, an offer or sale of the Notes within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act. The Netherlands The Lead Manager has represented and agreed that the Notes are not, will not and may not, directly or indirectly, be offered to the public in the Netherlands, but that an offer can be made if the offer is made exclusively to persons or entities which are (a) qualified investors (gekwalificeerde beleggers) as defined in the Wft or (b) represented by eligible discretionary asset managers in accordance with Article 55 of the Exemption Regulation DFSA (Vrijstellingsregeling Wft), or another exception or exemption to the requirement to publish an approved prospectus pursuant to the Wft applies to the offer provided a standard warning is applied as required by Article 5:20(5) or 5:5(2) Wft, if applicable, and further provided, in each case, that no such offer shall require the Lead Manager, the Issuer or the Seller to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive. The Lead Manager has represented and agreed that that the Class Z Notes, being notes to bearer that constitute a claim for a fixed sum against the Issuer and on which no interest is due, in definitive form of the Issuer may only be transferred and accepted, directly or indirectly, within, from or into the Netherlands through the mediation of either the Issuer or a member firm of Euronext Amsterdam in full compliance with the Dutch Savings Certificates Act (Wet inzake spaarbewijzen) of 21 May 1985 (as amended) and its implementing regulations, provided that no such mediation is required: (a) in respect of the transfer and acceptance of rights representing an interest in the Class Z Notes in global form, or (b) in respect of the initial issue of the Class Z Notes in definitive form to the first holders thereof, or (c) in respect of the transfer and acceptance of the Class Z Notes in definitive form between individuals not acting in the conduct of a business or profession or (d) in respect of the transfer and acceptance of the Class Z Notes within, from or into the Netherlands if all the Class Z Notes (either in definitive form or as rights representing an interest in the Class Z Notes in global form) are issued outside the Netherlands and are not distributed into the Netherlands in the course of initial distribution or immediately thereafter. 139

140 General The distribution of this Prospectus and the offering and sale of the Notes in certain jurisdictions may be restricted by law; persons into whose possession this Prospectus comes are required by the Issuer to inform themselves about and to observe any such restrictions. No action has been taken by the Issuer, the Arranger or the Lead Manager, which would or has been intended to permit a public offering of the Notes, or possession or distribution of this Prospectus or other offering material relating to the Notes, in any country or jurisdiction where action for that purpose is required. This Prospectus or any part of it does not constitute an offer, or an invitation to sell or a solicitation of an offer to buy any of the Notes in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in such jurisdiction. The Lead Manager has undertaken not to offer or sell directly or indirectly any Notes, or to distribute or publish this Prospectus or any other material relating to the Notes in or from any country or jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. 140

141 4.5 Regulatory and Industry Compliance EU Risk Retention Requirements The Retention Holder, in its capacity as the originator within the meaning of Article 405 of the CRR has separately undertaken to the Issuer, the Security Trustee, the Seller, the Arranger and the Lead Manager to retain, on an ongoing basis, a material net economic interest of not less than 5 per cent. in the securitisation transaction described in this Prospectus in accordance with the EU Risk Retention Requirements. As at the Closing Date, such material net economic interest will be held in accordance with item (a) of Article 405 of the CRR, Article 51(a) of the AIFMR and Article 254(2)(a) of the Solvency II Regulation by holding no less than 5 per cent. of the nominal value of each of the Classes of Notes sold or transferred to investors. The Retention Holder has separately undertaken to the Issuer, the Security Trustee, the Seller, the Arranger and the Lead Manager that it will comply with the requirements set forth in Article 52 (a) up to (and including) (d) of the AIFMR, Articles 408 and 409 of the CRR and Articles 254 and 256 paragraph 3 sub (a) up to (and including) sub (c) and sub (e) of the Solvency II Regulation. In addition to the information set out in and forming part of this Prospectus, the Retention Holder has undertaken to make materially relevant information available to investors with a view to such investor complying with Article 405 up to (and including) 409 of the CRR, Article 51, 52 and 53 of the AIFMR and Article 254 and 256 of the Solvency II Regulation. The Issuer Administrator on behalf of the Issuer will prepare quarterly investor reports wherein relevant information with regard to the Mortgage Loans and Mortgage Receivables will be disclosed publicly together with information on the retention of the material net economic interest by the Retention Holder. The quarterly investor reports can be obtained as further described in Section 8 (General) of this Prospectus. Each prospective investor is required to independently assess and determine the sufficiency of the information described above for the purposes of complying with Article 405 up to (and including) 409 of the CRR, Article 51, 52 and 53 of the AIFMR and Article 254 and 256 of the Solvency II Regulation and none of the Issuer, the Retention Holder, the Servicer, the Issuer Administrator nor the Lead Manager makes any representation or warranty that the information described above is sufficient in all circumstances for such purposes. U.S. Risk Retention Requirements Pursuant to the U.S. Risk Retention Requirements, a securitizer of asset-backed securities is required, unless an exemption exists, to retain an eligible vertical interest or eligible horizontal residual interest, or any combination thereof, in a securitization transaction. Under the U.S. Risk Retention Requirements, a securitizer includes a person who organizes and initiates a securitization transaction by selling or transferring assets, either directly or indirectly, including or through an affiliate or issuer. In order to comply with the U.S. Risk Retention Requirements, the Retention Holder, as a securitizer of this transaction, has elected to acquire an eligible vertical interest in the securitisation transaction by acquiring on the Closing Date 5 per cent. of each class of Notes and of the Certificates, as more fully described below (collectively, the Required Credit Risk), and thereafter to retain the Required Credit Risk until the end of the Risk Retention Period (as defined below). In the case of a securitisation transaction backed by residential mortgages, the Risk Retention Period commences on and includes the Closing Date and will end on the date that is the later of: five years after the Closing Date; and the date on which the total unpaid principal balance of the Mortgage Receivables has been reduced to 25 per cent. of the total unpaid principal balance of the Mortgage Receivables at the Cut- Off Date, but in any event no longer than seven years after the Closing Date. During the Risk Retention Period, (a) the Retention Holder (or a majority-owned affiliate ) will retain the Required Credit Risk, (b) the Retention Holder will be entitled to obtain financing to cover the cost of carrying the Required Credit 141

142 Risk so long as such financing is on a full recourse basis and (c) there will be limits on the Retention Holder s ability to hedge its risks associated with the ownership of the Required Credit Risk. If the Required Credit Risk retained by the Retention Holder as of the Closing Date is materially different from the amount that the Retention Holder intends to acquire and retain, as described above, the Retention Holder will provide the Issuer and Security Trustee with a statement to be provided to Noteholders and Certificateholders, setting forth the actual eligible vertical interest retained by the Retention Holder as of the Closing Date, and the Issuer will, following receipt of such information, make a copy of such information available to Noteholders and Certificateholders. Dutch Securitisation Standard This Prospectus follows the template table of contents and the template glossary of defined terms (save as otherwise indicated in this Prospectus), and the Investor Reports to be published by the Issuer will follow the applicable template Investor Report (save as otherwise indicated in the relevant Investor Report), each as published by the Dutch Securitisation Association on its website As a result the Notes comply with the standard created for residential mortgage-backed securities by the DSA (the RMBS Standard). This has also been recognised by Prime Collateralised Securities (PCS) UK Limited as the Domestic Market Guideline for the Netherlands in respect of this asset class. Volcker Rule The Issuer is not, and after giving effect to any offering and sale of the Notes and Certificates and the application of the proceeds thereof will not be, a covered fund for purposes of regulations adopted under Section 13 of the Bank Holding Company Act of 1956, as amended (commonly known as the Volcker Rule). In reaching this conclusion, although other statutory or regulatory exclusions and / or exemptions under the Investment Company Act of 1940, as amended (the Investment Company Act), and under the Volcker Rule and its related regulations may be available, the Issuer has determined that the Issuer would satisfy all of the elements of the exclusion from the definition of investment company under the Investment Company Act provided by Section 3(c)(5)(C) thereunder, and, accordingly, the Issuer may rely on the exemption from the definition of a covered fund under the Volcker Rule made available to entities that do not rely solely on Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act for their exclusion and / or exemption from registration under the Investment Company Act. 142

143 4.6 Estimated weighted average lives of the Notes The weighted average lives of the Notes will be influenced by, among other things, the actual rates of repayment and prepayment of the Mortgage Loans. The average lives of the Notes cannot be stated, as the actual rate of repayment and prepayment of the Mortgage Loans and a number of other relevant factors are unknown. However, calculations of possible average lives of the Notes can be made based on certain assumptions. The following tables have been prepared based on the characteristics of the Mortgage Loans and the following additional assumptions (together, the Modelling Assumptions) that: (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii) the Mortgage Portfolio Option Holder exercises the Mortgage Portfolio Purchase Option on the First Optional Redemption Date, in the first scenario and as set out in the table headed Assuming the occurrence of the Mortgage Portfolio Purchase Option on the First Optional Redemption Date or Mortgage Portfolio Purchase Option is not exercised, in the second scenario and as set out in the table headed To Maturity ; the Mortgage Loans are and continue to be fully performing and there are no arrears or enforcements, i.e., no Realised Losses; the Mortgage Loans are subject to an annualised CPR (exclusive of scheduled principal redemptions) of between 0 per cent. and 15 per cent. per annum as shown on the tables below; no Enforcement Notice has been served on the Issuer and no Event of Default has occurred; interest rate payable on any Eligible Investment held in the Issuer Collection Account is 0 per cent.; the Mortgage Receivables relating to the Mortgage Loans are sold to the Issuer for value as at the Cut-Off Date, therefore the accrual of cash flows starts at the Cut-Off Date; the statistical calculation date of the Mortgage Loans is 31 October 2016 and the Cut-Off Date (for these purposes) is 31 October 2016; the ratio of the Principal Amount Outstanding of the Class A Notes to the principal balance of the Mortgage Portfolio as at the Cut-Off Date is per cent.; the ratio of the Principal Amount Outstanding of the Class B Notes to the principal balance of the Mortgage Portfolio as at the Cut-Off Date is per cent.; the ratio of the Principal Amount Outstanding of the Class C Notes to the principal balance of the Mortgage Portfolio as at the Cut-Off Date is 4.75 per cent.; the ratio of the Principal Amount Outstanding of the Class D Notes to the principal balance of the Mortgage Portfolio as at the Cut-Off Date is 4.75 per cent.; the ratio of the Principal Amount Outstanding of the Class E Notes to the principal balance of the Mortgage Portfolio as at the Cut-Off Date is 5.80 per cent.; the ratio of the Principal Amount Outstanding of the Class Z Notes to the principal balance of the Mortgage Portfolio as at the Cut-Off Date is 9.00 per cent.; (xiv) the Notes are issued on or about 20 January 2017; 143

144 (xv) the first Notes Payment Date is the Notes Payment Date falling in April 2017; (xvi) (xvii) scheduled amortisation is calculated on an individual Mortgage Loan basis in accordance with the contractual repayment terms of each Mortgage Loan within the Mortgage Portfolio and is initially aggregated on a monthly basis; unscheduled amortisation is calculated on an aggregate basis by adjusting the scheduled amortisation in each period by the annualised constant prepayment rate; (xviii) no increase in the interest rate of any Mortgage Loan due to a repayment in full of the associated mortgage loan; (xix) (xx) (xxi) (xxii) the annualised CPR consists of both partial and full prepayments of the principal under the Mortgage Loans; the interest, prepayments and scheduled payments of the Mortgage Loans, and the weighted average lives of the Notes, are calculated on a 30/360 basis; no Servicer Termination Event has occurred; calculations of possible average lives of the Notes assume a flat EURIBOR for one month deposit of negative 0.30 per cent. and a flat EURIBOR for three month deposit of negative 0.30 per cent.; (xxiii) if a Mortgage Loan has a maturity prior to the Cut-Off Date, such Mortgage Loan will be assumed to pay its balance in full on the first Notes Payment Date; (xxiv) annual fee payable to the Servicer is 0.25 per cent. of the principal balance of the Mortgage Portfolio; and (xxv) the payment obligations under items (a) and (b) of Revenue Priority of Payments, excluding any amounts payable to the Servicer, are 80,000 per annum, payable on each Notes Payment Date. The actual characteristics and performance of the Mortgage Loans are likely to differ from the Modelling Assumptions. The following tables are hypothetical in nature and are provided only to give a general sense of how the principal cashflows might behave under various prepayment scenarios. For example, the Issuer does not expect that the Mortgage Receivables in relation to the Mortgage Loans will prepay at a constant rate until maturity, or that there will be no defaults or delinquencies on the Mortgage Loans. Any difference between the Modelling Assumptions and, among other things, the actual prepayment or loss experience on the Mortgage Loans will affect the redemption profile of the Notes and cause the weighted average lives of the Notes to differ (which difference could be material) from the corresponding information in the tables for each indicated CPR. Assuming the exercise of the Mortgage Portfolio Purchase Option on the First Optional Redemption Date Class A Notes (years) Class B Notes (years) Class C Notes (years) Class D Notes (years) Class E Notes (years) Class Z Notes (years) CPR 0% % %

145 4% % % % % To Maturity* Class A Notes (years) Class B Notes (years) Class C Notes (years) Class D Notes (years) Class E Notes (years) Class Z Notes (years) CPR 0% % % % % % % % For more information in relation to the risks involved in the use of the average lives estimated above, see Risk Factors regarding the Notes and Certificates above. * Assuming no exercise and completion of the Mortgage Portfolio Purchase Option on the First Optional Redemption Date or Clean-up Call Option. 145

146 4.7 Use of Proceeds The aggregate proceeds of the Notes and Certificates to be issued on the Closing Date amount to EUR 154,265,715. The Issuer will apply the net proceeds from the issue of the Notes and Certificates towards: (iii) the payment of the Purchase Price for the Mortgage Receivables purchased by the Issuer on the Closing Date under the Mortgage Receivables Purchase Agreement; the funding of the Reserve Fund; and the payment of certain expenses related to the establishment of the transaction contemplated by the Transaction Documents. Any surplus amounts will constitute Available Principal Funds and applied on the first Notes Payment Date in accordance with the Priority of Payments. See further Section 7.1 (Purchase, Repurchase and Sale). 146

147 4.8 Taxation in the Netherlands General This is a general summary and the tax consequences as described here may not apply to a holder of any of the Notes and Certificates. Any potential investors should consult their own tax advisers for more information about the tax consequences of acquiring, owning and disposing of any of the Notes and Certificates in their particular circumstances. This taxation summary solely addresses the principal Netherlands tax consequences of the acquisition, the ownership and disposition of Notes and Certificates issued by Issuer after the date hereof held by a holder of any of the Notes and Certificates who is not a resident of the Netherlands. It does not consider every aspect of taxation that may be relevant to a particular holder of any of the Notes and Certificates under special circumstances or who is subject to special treatment under applicable law. Where in this summary English terms and expressions are used to refer to Netherlands concepts, the meaning to be attributed to such terms and expressions shall be the meaning to be attributed to the equivalent Netherlands concepts under Netherlands tax law. This summary is based on the tax laws of the Netherlands as they are in force and in effect on the date of this Prospectus. The Netherlands means the part of the Kingdom of the Netherlands located in Europe. The laws upon which this summary is based are subject to change, potentially with retroactive effect. A change to such laws may invalidate the contents of this summary, which will not be updated to reflect any such change. This summary assumes that each transaction with respect to the Notes and Certificates is at arm s length. Withholding Tax All payments by Issuer under the Notes and Certificates can be made free of withholding or deduction of any taxes of whatever nature imposed, levied, withheld or assessed by the Netherlands or any political subdivision or taxing authority thereof or therein. Taxes on Income and Capital Gains A holder of any of the Notes and Certificates will not be subject to any Netherlands taxes on income or capital gains in respect of such Notes and Certificates, including such tax on any payment under Notes and Certificates or in respect of any gain realised on the disposal, deemed disposal or exchange of Notes and Certificates as applicable, provided that: (iii) such holder is neither a resident nor deemed to be a resident of the Netherlands, Bonaire, Saint Eustatius or Saba; such holder does not have an enterprise or an interest in an enterprise that is, in whole or in part, carried on through a permanent establishment or a permanent representative in the Netherlands, Bonaire, Saint Eustatius or Saba and to which enterprise or part of an enterprise, as the case may be, Notes and Certificates are attributable; and if such holder is an individual, such income or capital gain does not form a benefit from miscellaneous activities in the Netherlands (resultaat uit overige werkzaamheden) which, for instance, would be the case if the activities in the Netherlands with respect to Notes and Certificates exceed normal active asset management (normaal, actief vermogensbeheer) or if income and gains are derived from the holding, whether directly or indirectly, of (a combination of) shares, debt claims or other rights (a lucrative interest ; lucratief belang) that the holder thereof has acquired under such circumstances that such income and gains are intended to be remuneration for work or services performed by such holder (or a related person) in the Netherlands, whether within or outside an 147

148 employment relation, where such lucrative interest provides the holder thereof, economically speaking, with certain benefits that have a relation to the relevant work or services. Gift, Estate or Inheritance Taxes No gift, estate or inheritance taxes will arise in the Netherlands with respect to an acquisition of any of the Notes and Certificates by way of a gift by, or on the death of, a holder who is neither resident nor deemed to be resident in the Netherlands for Netherlands inheritance and gift tax purposes, unless in the case of a gift of such Notes and Certificates by an individual who at the date of the gift was neither resident nor deemed to be resident in the Netherlands, such individual dies within 180 days after the date of the gift, while being resident or deemed to be resident in the Netherlands. For purposes of Netherlands gift and inheritance tax, an individual with the Netherlands nationality will be deemed to be resident in the Netherlands if such individual has been resident in the Netherlands at any time during the ten years preceding the date of the gift or the individual s death. For purposes of Netherlands gift tax, an individual not holding the Netherlands nationality will be deemed to be resident in the Netherlands if such individual has been resident in the Netherlands at any time during the 12 months preceding the date of the gift. For purposes of Netherlands gift and inheritance tax, a gift that is made under a condition precedent is deemed to have been made at the moment such condition precedent is satisfied. If the condition precedent is fulfilled after the death of the donor, the gift is deemed to be made upon the death of the donor. Value Added Tax There is no Netherlands value added tax payable in respect of payments in consideration for the issue of any of the Notes and Certificates, in respect of the payment of interest or principal under such Notes and Certificates, or the transfer of such Notes and Certificates. Other Taxes and Duties There is no Netherlands registration tax, capital tax, stamp duty or any other similar tax or duty, other than court fees, payable in the Netherlands by a holder of any of the Notes and Certificates in respect of or in connection with the issue, subscription, allotment and transfer of such Notes and Certificates, and / or the execution, delivery and / or enforcement by legal proceedings (including any foreign judgment in the courts of the Netherlands) of the Notes and Certificates or the performance of the obligations of Issuer under the Notes and Certificates. Residence A holder of any of the Notes and Certificates will not be treated as a resident of the Netherlands by reason only of the holding of such Notes and Certificates or by reason only of the execution, performance, delivery and / or enforcement of documents relating to the issue of the Notes and Certificates or the performance by Issuer of its obligations thereunder or under the Notes and Certificates. The proposed financial transactions tax (FTT) On 14 February 2013, the European Commission published a proposal for a Directive for a common FTT in Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain. Estonia, however, withdrew from the enhanced cooperation in March 2016 (the FTT Participating Member States). The proposed FTT has a very broad scope and could apply to certain dealings in financial instruments (including secondary market transactions). The FTT could apply to persons both within and outside of the FTT Participating Member States. Generally, it would apply to certain dealings in financial instruments 148

149 where at least one party is a financial institution, and either at least one party is established or deemed to be established in an FTT Participating Member State or the financial instruments are issued in an FTT Participating Member State. In the ECOFIN meeting of 17 June 2016, the FTT was discussed between the EU Member States. It has been reiterated in this meeting that the FTT Participating Member States envisage introducing an FTT by the socalled enhanced cooperation. The proposed Directive defines how the FTT would be implemented in the FTT Participating Member States. It involves a minimum 0.1 per cent. tax rate for transactions in all types of financial instruments, except for derivatives that would be subject to a minimum 0.01 per cent. tax rate. The Directive requires the unanimous agreement of the FTT Participating Member States, after consultation of the European Parliament. All EU Member States can participate in discussions on the proposal, though only FTT Participating Member States can take part in the vote. The proposed FTT remains subject to negotiation between the FTT Participating Member States. It may therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may decide to participate, and FTT Participating Member States may withdraw. Prospective holders of any of the Notes and Certificates are advised to seek their own professional advice in relation to the FTT. FATCA Pursuant to certain provisions of the U.S. Internal Revenue Code of 1986, commonly known as FATCA, a foreign financial institution may be required to withhold on certain payments it makes ( foreign passthru payments ) to persons that fail to meet certain certification, reporting, or related requirements. A number of jurisdictions (including the Netherlands) have entered into, or have agreed in substance to, intergovernmental agreements with the United States to implement FATCA ( IGAs ), which modify the way in which FATCA applies in their jurisdictions. Under the provisions of IGAs as currently in effect, a foreign financial institution in an IGA jurisdiction would generally not be required to withhold under FATCA or an IGA from payments that it makes. Certain aspects of the application of the FATCA provisions and IGAs to instruments such as the Notes and Certificates, including whether withholding would ever be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Notes and Certificates, are uncertain and may be subject to change. Even if withholding would be required pursuant to FATCA or an IGA with respect to payments on instruments such as the Notes and Certificates, such withholding would not apply prior to 1 January 2019 and Notes and Certificates issued on or prior to the date that is six months after the date on which final regulations defining foreign passthru payments are filed with the U.S. Federal Register generally would be grandfathered for purposes of FATCA withholding unless materially modified after such date. Holders should consult their own tax advisors regarding how these rules may apply to their investment in any of the Notes and Certificates. In the event any withholding would be required pursuant to FATCA or an IGA with respect to payments on any of the Notes and Certificates, no person will be required to pay additional amounts as a result of the withholding. Common Reporting Standard A number of jurisdictions have entered into or are committed to entering into inter-governmental agreements for the automatic cross-border exchange of tax information on a multilateral basis under a regime known as the OECD Common Reporting Standard (CRS). The Netherlands is a signatory to the OECD Multilateral Convention in respect of the CRS with various jurisdictions. The Netherlands has committed, along with 149

150 around 55 other countries, to the early implementation of the CRS, with the first reporting year being 2016 and the reporting obligations commencing in The Dutch government has implemented EU Council Directive 2014/107/EU in its domestic legislation, providing for the required legal basis for the CRS, which requires Dutch Financial Institutions to identify specified persons in the jurisdictions that have implemented, or are implementing the CRS, and to report related information to the Dutch tax authorities (for automatic exchange with the relevant tax authorities in such jurisdictions) in order to avoid the commission of an offence, which may involve the imposition of financial penalties or other sanctions. 150

151 4.9 Security Parallel Debt Agreement In the Parallel Debt Agreement the Issuer will irrevocably and unconditionally undertake to pay to the Security Trustee the Parallel Debt, which is an amount equal to the aggregate amount due (verschuldigd) by the Issuer: (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) to the Directors under the Management Agreements; to the Servicer under the Servicing Agreement; to the Issuer Administrator under the Administration Agreement; to the Paying Agent and the Reference Agent under the Paying Agency Agreement; to the Noteholders under the Notes; to the Certificateholders under the Certificates; to the Seller under the Mortgage Receivables Purchase Agreement; to the Issuer Account Bank under the Issuer Account Agreement; to the Collection Foundation under the Receivables Proceeds Distribution Agreement; to the Back-Up Servicer Facilitator under the Servicing Agreement; to the Back-Up Issuer Administrator under the Administration Agreement; and to the Liquidation Agent under the Liquidation Agent Agreement, (the parties referred to in items to (xii) (inclusive) together the Secured Creditors). The Parallel Debt constitutes a separate and independent obligation of the Issuer and constitutes the Security Trustee s own separate and independent claim (eigen en zelfstandige vordering) to receive payment of the Parallel Debt from the Issuer. Upon receipt by the Security Trustee of any amount in payment of the Parallel Debt, the payment obligations of the Issuer to the Secured Creditors shall be reduced by an amount equal to the amount so received and vice versa. To the extent that the Security Trustee irrevocably and unconditionally receives any amount in payment of the Parallel Debt, the Security Trustee shall distribute such amount among the Secured Creditors in accordance with the Post-Enforcement Priority of Payments. The amounts due to the Secured Creditors will, broadly, be equal to amounts recovered (verhaald) by the Security Trustee on the Mortgage Receivables and other assets pledged to the Security Trustee under the Issuer Mortgage Receivables Pledge Agreement, the Deed of Assignment and Pledge, the Issuer Rights Pledge Agreement and the Collection Foundation Account Pledge Agreement. Pledge Agreements The Issuer will vest a right of pledge in favour of the Security Trustee on the Mortgage Receivables and the Beneficiary Rights on the Closing Date under the Issuer Mortgage Receivables Pledge Agreement and the Deed of Assignment and Pledge, which will secure the payment obligations of the Issuer to the Security Trustee under the Parallel Debt Agreement and any other Transaction Documents. The pledge on the 151

152 Mortgage Receivables and the Beneficiary Rights relating to such Mortgage Receivables will not be notified to the Borrowers and the Insurance Companies, respectively, except upon the occurrence of certain notification events, which are similar to the Assignment Notification Events but relating to the Issuer, including the issuing of an Enforcement Notice by the Security Trustee (the Pledge Notification Events). Prior to notification of the pledge to the Borrowers or the Insurance Companies, the pledge will be a silent right of pledge (stil pandrecht) within the meaning of Article 3:239 of the Dutch Civil Code. From the occurrence of a Pledge Notification Event and, consequently notification to the Borrowers and any Insurance Companies party to an Insurance Policy and withdrawal of the power to collect, the Security Trustee will collect (innen) all amounts due to the Issuer whether by the Borrowers, the Insurance Companies party to Insurance Policies or any other parties to the Transaction Documents. Under the Trust Deed, the Security Trustee will, until the delivery of an Enforcement Notice for the sole purpose of enabling the Issuer to make payments in accordance with the relevant Priority of Payments, pay or procure the payment of certain amounts to the Issuer, whilst for that sole purpose terminating (opzeggen) its right of pledge solely in respect of the amounts so paid. In addition, a right of pledge will be vested by the Issuer in favour of the Security Trustee on the Closing Date under the Issuer Rights Pledge Agreement over all rights of the Issuer: under or in connection with: (a) (b) (c) (d) (e) (f) (g) the Mortgage Receivables Purchase Agreement; the Servicing Agreement; the Issuer Account Agreement; the Paying Agency Agreement; the Administration Agreement; the Receivables Proceeds Distribution Agreement; and the Liquidation Agent Agreement; and in respect of the Issuer Accounts. This right of pledge will be notified to the relevant obligors and will, therefore, be a disclosed right of pledge (openbaar pandrecht), but the Security Trustee will grant a power to collect to the Issuer which will be withdrawn upon the occurrence of any of the Pledge Notification Events. Under the Collection Foundation Account Pledge Agreement, the Issuer, among others, will grant a first ranking disclosed right of repledge (herpandrecht) in respect of the Collection Foundation s rights over the Collection Foundation Account in favour of, among others, the Security Trustee, and, by operation of the right of repledge in favour of the Security Trustee, a second ranking disclosed right of pledge by the Collection Foundation in respect of its rights over the Collection Foundation Account in favour of, among others, the Issuer, is granted by the Collection Foundation. Such rights of pledge are governed by Dutch law and have been notified to the Collection Foundation Account Bank and the Collection Foundation, respectively. The Collection Foundation Account Pledge Agreement provides that future issuers (and any security trustees) in securitisation transactions and future vehicles in conduit transactions or similar transactions (and any security trustees relating thereto) initiated by the Originator will also have the benefit of the right of pledge on the balance standing to the credit of the Collection Foundation Account. The rights of Security 152

153 Trustee will rank pari passu to the rights of each further security trustee in such securitisation transactions, conduit transactions or similar transactions and the rights of Issuer will rank pari passu to the rights of each further issuer in such securitisation transactions, conduit transactions or similar transactions. The rights of pledge created in the Pledge Agreements secure any and all liabilities of the Issuer to the Security Trustee resulting from or in connection with the Parallel Debt Agreement and any other Transaction Documents. Secured Creditors The security rights described above shall serve as security for the benefit of the Secured Creditors, including each of the Class A Noteholders, the Class B Noteholders, the Class C Noteholders, the Class D Noteholders, the Class E Noteholders, the Class Z Noteholders and the Certificateholders. Any amounts owing to the Noteholders and Certificateholders of any Class or Subclass, as the case may be, of Notes and Certificates, as applicable, will rank in accordance with the relevant Priority of Payments. See further Section 5 (Credit Structure) below. 153

154 5. CREDIT STRUCTURE The structure of the credit arrangements for the proposed issue of the Notes and Certificates is summarised below. 5.1 Available Funds Available Revenue Funds Prior to the delivery of an Enforcement Notice by the Security Trustee, the sum of the following amounts, calculated on each Notes Calculation Date, received or to be received or held by the Issuer in respect of the immediately preceding Notes Calculation Period (items under (a) up to (and including) (k) less items (l) and (m) together, the Available Revenue Funds): (a) (b) (c) (d) (e) (f) (g) (h) (j) (k) any interest on the Mortgage Receivables, any Prepayment Penalties; any interest accrued on the Issuer Accounts; any proceeds of any Eligible Investments made by the Issuer and not attributable to principal; any Net Foreclosure Proceeds to the extent such proceeds do not relate to principal; amounts standing to the credit of the Non-Liquidity Reserve Fund Ledger; amounts standing to the credit of the Liquidity Reserve Fund Ledger, to the extent there is a shortfall to discharge items (a) to (c) (inclusive) of the Revenue Priority of Payments after using any amounts standing to the credit of the Non-Liquidity Reserve Fund Ledger; the Available Principal Funds, to the extent there is a Revenue Shortfall, provided that in relation to the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, the PDL Condition is satisfied; any amounts in connection with: (x) any repurchase of Mortgage Receivables by the Seller from the Issuer following the exercise of the Clean-up Call Option; and (y) any sale of the Mortgage Receivables by the Issuer under and in accordance with the Conditions, Certificate Conditions, the Trust Deed and the other Transaction Documents, as applicable, in each case, to the extent such amounts do not relate to principal; any amounts standing to the credit of any of the Issuer Accounts, after all amounts of interest and principal due under the Notes and amounts due under the Certificates, have been paid in full; and any amounts to be drawn from the Issuer Collection Account with a corresponding debit to the Interest Reconciliation Ledger on the immediately succeeding Notes Payment Date, less: (l) on the first Notes Payment Date of each calendar year, an amount equal to 25 per cent. of the higher of (A) Euro 3,500 and (B) 10 per cent. of the annual fee, due and payable by the Issuer to the Director in connection with the Issuer Management Agreement, representing taxable income for corporate income tax purposes in the Netherlands (the Profit); and 154

155 (m) any amount to be credited to the Interest Reconciliation Ledger on the immediately succeeding Notes Payment Date, will, where applicable after transfer to the Issuer Collection Account on the Notes Calculation Date, be applied in accordance with the Revenue Priority of Payments. Available Principal Funds Prior to the delivery of an Enforcement Notice by the Security Trustee, the sum of the following amounts calculated on each Notes Calculation Date received or to be received or held by the Issuer in respect of the immediate preceding Notes Calculation Period (items under (a) up to (and including) (j) less items (k) and (l) together, the Available Principal Funds): (a) (b) (c) (d) (e) (f) (g) (h) (j) any repayment and prepayment of principal in full or in part, under the Mortgage Receivables, excluding any Prepayment Penalties under the Mortgage Receivables; proceeds of any Eligible Investments made by the Issuer and attributable to principal; any Net Foreclosure Proceeds to the extent such proceeds relate to principal; any amounts in connection with: (x) a repurchase of Mortgage Receivables by the Seller following the exercise of the Clean-up Call Option; and (y) any sale of the Mortgage Receivables by the Issuer under and in accordance with the Conditions, Certificate Conditions, the Trust Deed and the other Transaction Documents, as applicable, in each case, to the extent such amounts relate to principal; any amounts received as indemnity payments under the Mortgage Receivables Purchase Agreement; any amounts to be credited to the Principal Deficiency Ledger on the immediately succeeding Notes Payment Date in accordance with the Administration Agreement; any part of the Available Principal Funds calculated on the immediately preceding Notes Calculation Date, which has not been applied towards redemption of the Notes and amounts due under the Certificates on the immediately preceding Notes Payment Date; the amount by which on the first Notes Payment Date (x) the aggregate proceeds of the Notes exceeds (y) the Purchase Price of the Mortgage Receivables purchased at the Closing Date, provided that the Reserve Fund Account has been credited with the Reserve Fund Required Amount; any amounts to be drawn from the Issuer Collection Account with a corresponding debit to the Principal Reconciliation Ledger on the immediately succeeding Notes Payment Date; and in relation to the Final Rated Notes Redemption Date, the amounts standing to the credit of the Reserve Fund, less: (k) (l) any Revenue Shortfall on the immediately succeeding Notes Payment Date; and any amount to be debited from the Principal Reconciliation Ledger on the immediately succeeding Notes Payment Date, will, where applicable after transfer to the Issuer Collection Account on the Notes Calculation Date, be applied in accordance with the Redemption Priority of Payments. 155

156 Cash Collection Arrangements Payments by the Borrowers of interest and principal under the Mortgage Loans are due on the first calendar day of each month (or the next Business Day if such day is not a Business Day), interest being payable in arrears. All payments made by Borrowers are required to be paid into the Collection Foundation Account maintained by the Collection Foundation with the Collection Foundation Account Bank. The Collection Foundation Account is also used for the collection of moneys paid in respect of mortgage loans other than the Mortgage Loans and in respect of other moneys to which the Originator or entities related to the Originator are entitled against the Collection Foundation. The Collection Foundation Account will be pledged in favour of the Beneficiaries under the Collection Foundation Account Pledge Agreement. The right of pledge created under the Collection Foundation Account Pledge Agreement will remain in place until any and all liabilities of all Beneficiaries (whether actual or contingent, and whether in relation to principal, interest or otherwise), to the extent such liabilities result in any claim for payment (geldvordering) against the (Collection Foundation in favour of such Beneficiary) have been discharged in full. If at any time the rating of the Collection Foundation Account Bank falls below the Requisite Credit Rating (Collection Foundation Account Bank) or any such rating is withdrawn by any Credit Rating Agency, the Issuer or the Collection Foundation on the Issuer s behalf will be required within the Relevant Remedy Period to transfer the balance standing to the credit of the Collection Foundation Account solely attributable to the Mortgage Receivables purchased and owned by the Issuer to an alternative account bank having at least the Requisite Credit Rating (Collection Foundation Account Bank) or to obtain a third party with at least the Requisite Credit Rating (Collection Foundation Account Bank) to guarantee the obligations of the Collection Foundation Account Bank or (iii) find another solution in accordance with the methodology of the Credit Rating Agencies at such time in order to maintain the then current ratings assigned to the Rated Notes. In the event of a transfer to an alternative foundation accounts provider as referred to under above, the Collection Foundation will enter into a pledge agreement and create a right of pledge over such bank account in favour of, among others, the Issuer. Such right of pledge will be on terms substantially the same as the Collection Foundation Account Pledge Agreement. The Servicer will undertake to at the latest on each Mortgage Collection Payment Date and on at least a weekly basis after that (or at such other times as the Issuer Administrator and the Issuer may agree from time to time), transfer all amounts of principal, interest (including penalty interest) and Prepayment Penalties in respect of Mortgage Receivables received into the Collection Foundation Account and that the Issuer Administrator has recorded as having cleared during the immediately preceding Mortgage Calculation Period in respect of such Mortgage Receivables, to the Issuer Collection Account by or on behalf of the Collection Foundation in accordance with the Receivables Proceeds Distribution Agreement, without any set off or counterclaim of whatever kind. Eligible Investments Any balance standing to the credit of the Issuer Collection Account may at the option of the Issuer be invested into euro denominated securities, subject to certain conditions, including that such securities may not have a maturity beyond the immediately succeeding Notes Payment Date and that such securities have been assigned the Eligible Investments Minimum Ratings or in other securities that meet the then current criteria of the Credit Rating Agencies (the Eligible Investments), provided that the Issuer shall provide Security over such securities to the satisfaction of the Security Trustee. The Eligible Investments Minimum Ratings means in respect of securities: 156

157 (a) (b) (c) (d) a rating of AAA or R-1 (high) by DBRS, Aaa or P-1 by Moody s or AAA or A-1+ by S&P, in case of a remaining tenor less than one year; a rating of AA or R-1 (high) by DBRS, Aa1 or P-1 by Moody s or AA+ or A-1+ by S&P, in case of a remaining tenor less than 180 days; a rating of AA (low) or R-1 (mid) by DBRS, Aa3 or P-1 by Moody s or AA- or A-1+ by S&P, in case of a remaining tenor less than one year but longer than 90 days; and a rating of A or R-1 (low) by DBRS, A2 or P-1 by Moody s or A or A-1 by S&P, in case of a remaining tenor less than 30 days; 157

158 5.2 Priority of Payments Third party expenses Any amount due and payable to third parties (other than pursuant to any of the Transaction Documents), under obligations incurred in the Issuer s business on a date which is not a Notes Payment Date, may be made on such due date by the Issuer from the Issuer Collection Account or the Reserve Fund Account, to the extent that the Issuer Collection Account funds are sufficient or to the extent that the balance standing to the credit of the Reserve Fund Account is in excess of the Reserve Fund Required Amount, as applicable, to make such payment. Priority of Payments in respect of interest Unless the Mortgage Portfolio is sold and assigned under an Issuer Sale Process, the Tax Call Option, (iii) the Mortgage Portfolio Purchase Option or (iv) a Market Sale Process, in which case, the Post- Enforcement Priority of Payments shall apply in relation to the application of the relevant funds, prior to the delivery of an Enforcement Notice by the Security Trustee, the Available Revenue Funds will, under the terms of the Trust Deed be applied by the Issuer on the Notes Payment Date immediately succeeding the relevant Notes Calculation Date as follows (in each case, only if and to the extent that payments of a higher order of priority have been made in full) (the Revenue Priority of Payments): (a) first, in or towards satisfaction, pari passu and pro rata, according to the respective amounts then outstanding, of: (iii) the fees, costs, expenses or other remuneration due and payable to the Directors in connection with the Management Agreements; the fees, costs, expenses or other remuneration due and payable to the Collection Foundation under the Receivables Proceeds Distribution Agreement; and any costs, charges, liabilities and expenses incurred by the Security Trustee under or in connection with any of the Transaction Documents; (b) second, in or towards satisfaction, pari passu and pro rata, according to the respective amounts then outstanding, of: (iii) (iv) (v) the fees, costs and expenses due and payable to the Servicer under the Servicing Agreement; the fees, costs and expenses due and payable to the Issuer Administrator under the Administration Agreement; any amounts due and payable to third parties under obligations incurred in the Issuer s business (other than under the Transaction Documents), including, in or towards satisfaction of sums due or provisions for any payment of the Issuer s liability, if any, to tax (other than Dutch corporate income tax over the Profit); the fees and expenses of the Credit Rating Agencies and any legal advisor, auditor and accountant, appointed by the Issuer or the Security Trustee; any amounts due to the Issuer Account Bank under the Issuer Account Agreement (including, negative interest on the Issuer Accounts); 158

159 (vi) fees and expenses due to the Paying Agent and the Reference Agent under the Paying Agency Agreement; (vii) any amounts due to the Liquidation Agent under the Liquidation Agent Agreement; (viii) any listing fees payable to the Irish Stock Exchange; (ix) (x) any amounts due to the Back-Up Issuer Administrator under the Administration Agreement; and any amounts due to the Back-Up Servicer Facilitator under the Servicing Agreement; (c) (d) (e) (f) (g) (h) (j) (k) (l) (m) third, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of interest due and payable on the Class A Notes; fourth, in or towards satisfaction, of sums to be credited to the Class A Principal Deficiency Ledger until the debit balance, if any, on the Class A Principal Deficiency Ledger is reduced to zero; fifth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of interest (excluding any Net WAC Additional Amounts) due and payable on the Class B Notes; sixth, in or towards satisfaction, of sums to be credited to the Class B Principal Deficiency Ledger until the debit balance, if any, on the Class B Principal Deficiency Ledger is reduced to zero; seventh, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of interest (excluding any Net WAC Additional Amounts) due and payable on the Class C Notes; eighth, in or towards satisfaction, of sums to be credited to the Class C Principal Deficiency Ledger until the debit balance, if any, on the Class C Principal Deficiency Ledger is reduced to zero; ninth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of interest (excluding any Net WAC Additional Amounts) due and payable on the Class D Notes; tenth, in or towards satisfaction, of sums to be credited to the Class D Principal Deficiency Ledger until the debit balance, if any, on the Class D Principal Deficiency Ledger is reduced to zero; eleventh, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of interest (excluding any Net WAC Additional Amounts) due and payable on the Class E Notes; twelfth, in or towards satisfaction, of sums to be credited to the Class E Principal Deficiency Ledger until the debit balance, if any, on the Class E Principal Deficiency Ledger is reduced to zero; thirteenth, in or towards satisfaction of any sums required to replenish the Reserve Fund up to the Reserve Fund Required Amount, by: first, replenishing the Liquidity Reserve Fund Ledger until the Liquidity Reserve Fund Required Amount is satisfied; and then second, replenishing the Non-Liquidity Reserve Fund Ledger until the Non-Liquidity Reserve Fund Required Amount is satisfied; 159

160 (n) (o) (p) (q) (r) (s) fourteenth, in or towards satisfaction, of sums to be credited to the Class Z Principal Deficiency Ledger until the debit balance, if any, on the Class Z Principal Deficiency Ledger is reduced to zero; fifteenth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of any Net WAC Additional Amount due and payable on the Class B Notes; sixteenth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of any Net WAC Additional Amount due and payable on the Class C Notes; seventeenth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of any Net WAC Additional Amount due and payable on the Class D Notes; eighteenth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of any Net WAC Additional Amount due and payable on the Class E Notes; and nineteenth, pro rata and pari passu, according to the respective amounts then outstanding, amounts due and payable to the holders of the R1 Certificates. Priority of Payments in respect of principal Unless the Mortgage Portfolio is sold and assigned under an Issuer Sale Process, the Tax Call Option, (iii) the Mortgage Portfolio Purchase Option or (iv) a Market Sale Process, in which case, the Post- Enforcement Priority of Payments shall apply in relation to the application of the relevant funds, prior to the delivery of an Enforcement Notice by the Security Trustee, the Available Principal Funds will, under the terms of the Trust Deed, be applied by the Issuer on the Notes Payment Date immediately succeeding the relevant Notes Calculation Date as follows (in each case, only if and to the extent that payments of a higher order of priority have been made in full) (the Redemption Priority of Payments): (a) (b) (c) (d) (e) (f) first, after application of (and when aggregated with) any Available Revenue Funds applied to replenish the Liquidity Reserve Fund Ledger under item (m) of the Revenue Priority of Payments, to replenish the Liquidity Reserve Fund Ledger until the Reserve Fund Required Amount is satisfied, with a corresponding debit of the relevant Principal Deficiency Ledger; second, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of principal amounts due and payable under the Class A Notes until fully redeemed in accordance with the Conditions; third, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of principal amounts due and payable under the Class B Notes until fully redeemed in accordance with the Conditions; fourth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of principal amounts due and payable under the Class C Notes until fully redeemed in accordance with the Conditions; fifth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of principal amounts due and payable under the Class D Notes until fully redeemed in accordance with the Conditions; sixth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of principal amounts due and payable under the Class E Notes until fully redeemed in accordance with the Conditions; 160

161 (g) (h) (j) (k) (l) seventh, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of any Net WAC Additional Amount due and payable on the Class B Notes, to the extent that such amounts do not form part of any payment in terms of item (o) of the Revenue Priority of Payments; eighth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of any Net WAC Additional Amount due and payable on the Class C Notes, to the extent that such amounts do not form part of any payment in terms of item (p) of the Revenue Priority of Payments; ninth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of any Net WAC Additional Amount due and payable on the Class D Notes, to the extent that such amounts do not form part of any payment in terms of item (q) of the Revenue Priority of Payments; tenth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of any Net WAC Additional Amount due and payable on the Class E Notes, to the extent that such amounts do not form part of any payment in terms of item (r) of the Revenue Priority of Payments; eleventh, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of principal amounts due and payable under the Class Z Notes until fully redeemed in accordance with the Conditions; and twelfth, pro rata and pari passu, according to the respective amounts then outstanding, amounts due and payable to the holders of the R2 Certificates. Post-Enforcement Priority of Payments If (A) the Mortgage Portfolio is sold and assigned under an Issuer Sale Process, the Tax Call Option, (iii) the Mortgage Portfolio Purchase Option or (iv) a Market Sale Process, the then applicable Available Revenue Funds and Available Principal Funds, or (B) following delivery of an Enforcement Notice, the then applicable Enforcement Available Amount, will, under the terms of the Trust Deed, in each case, be applied in the following order of priority (and in each case only if and to the extent that payments of a higher order of priority have been made in full) (the Post-Enforcement Priority of Payments): (a) first, in or towards satisfaction, pari passu and pro rata, according to the respective amounts then outstanding, of: the fees, costs, expenses or other remuneration due and payable to the Directors in connection with the Management Agreements; the fees, costs, expenses or other remuneration due and payable to the Collection Foundation under the Receivables Proceeds Distribution Agreement; (b) second, in or towards satisfaction, pari passu and pro rata, according to the respective amounts then outstanding, of: the fees, costs and expenses due and payable to the Servicer under the Servicing Agreement; the fees, costs and expenses due and payable to the Issuer Administrator under the Administration Agreement; 161

162 (iii) (iv) (v) (vi) any amounts due and payable to third parties under obligations incurred in the Issuer s business (other than under the Transaction Documents), including, in or towards satisfaction of sums due or provisions for any payment of the Issuer s liability, if any, to tax (other than Dutch corporate income tax over the Profit); the fees and expenses of the Credit Rating Agencies and any legal advisor, auditor and accountant, appointed by the Issuer or the Security Trustee; any amounts due to the Issuer Account Bank under the Issuer Account Agreement (including, negative interest on the Issuer Accounts); fees and expenses due to the Paying Agent and the Reference Agent under the Paying Agency Agreement; (vii) any amounts due to the Liquidation Agent under the Liquidation Agent Agreement; (viii) any listing fees payable to the Irish Stock Exchange; (ix) (x) any amounts due to the Back-Up Issuer Administrator under the Administration Agreement; and any amounts due to the Back-Up Servicer Facilitator under the Servicing Agreement; (c) (d) (e) (f) (g) (h) (j) (k) third, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of all amounts of interest and principal due and payable in respect of the Class A Notes; fourth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of all amounts of interest (excluding any Net WAC Additional Amounts) and principal due and payable in respect of the Class B Notes; fifth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of all amounts of interest (excluding any Net WAC Additional Amounts) and principal due and payable in respect of the Class C Notes; sixth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of all amounts of interest (excluding any Net WAC Additional Amounts) and principal due and payable in respect of the Class D Notes; seventh, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of all amounts of interest (excluding any Net WAC Additional Amounts) and principal due and payable in respect of the Class E Notes; eighth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of any Net WAC Additional Amount due and payable on the Class B Notes; ninth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of any Net WAC Additional Amount due and payable on the Class C Notes; tenth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of any Net WAC Additional Amount due and payable on the Class D Notes; eleventh, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of any Net WAC Additional Amount due and payable on the Class E Notes; 162

163 (l) (m) twelfth, in or towards satisfaction, pro rata and pari passu, according to the respective amounts then outstanding, of all amounts of interest and principal due and payable in respect of the Class Z Notes; and thirteenth, pro rata and pari passu, according to the respective amounts then outstanding, amounts due and payable to the holders of the R2 Certificates. 163

164 5.3 Loss Allocation Principal Deficiency Ledger A Principal Deficiency Ledger comprising six sub-ledgers, known as the Class A Principal Deficiency Ledger, the Class B Principal Deficiency Ledger, the Class C Principal Deficiency Ledger, the Class D Principal Deficiency Ledger, the Class E Principal Deficiency Ledger and the Class Z Principal Deficiency Ledger respectively, will be established by or on behalf of the Issuer in order to record: (iii) any Realised Loss on the Mortgage Receivables; any amounts applied towards satisfaction of item (a) of the Redemption Priority of Payments; and any Revenue Shortfall. The sum of any Realised Loss and Revenue Shortfall: (iii) (iv) (v) (vi) will be debited to the Class Z Principal Deficiency Ledger (such debit items being recredited in accordance with the Revenue Priority of Payments on each relevant Notes Payment Date) so long as the debit balance on such sub-ledger is less than the sum of the Principal Amount Outstanding of the Class Z Notes, and after that such amounts; will be debited to the Class E Principal Deficiency Ledger (such debit items being recredited in accordance with the Revenue Priority of Payments on each relevant Notes Payment Date) so long as the debit balance on such sub-ledger is less than the sum of the Principal Amount Outstanding of the Class E Notes, and after that such amounts; will be debited to the Class D Principal Deficiency Ledger (such debit items being recredited in accordance with the Revenue Priority of Payments on each relevant Notes Payment Date) so long as the debit balance on such sub-ledger is less than the sum of the Principal Amount Outstanding of the Class D Notes, and after that such amounts; will be debited to the Class C Principal Deficiency Ledger (such debit items being recredited in accordance with the Revenue Priority of Payments on each relevant Notes Payment Date) so long as the debit balance on such sub-ledger is less than the sum of the Principal Amount Outstanding of the Class C Notes, and after that such amounts; will be debited to the Class B Principal Deficiency Ledger (such debit items being recredited in accordance with the Revenue Priority of Payments on each relevant Notes Payment Date) so long as the debit balance on such sub-ledger is less than the sum of the Principal Amount Outstanding of the Class B Notes, and after that such amounts; and will be debited, pro rata according to the Principal Amount Outstanding of the Class A Notes on each Notes Payment Date, to the Class A Principal Deficiency Ledger (such debit items being recredited in accordance with the Revenue Priority of Payments on each relevant Notes Payment Date). Realised Loss means, on any Notes Payment Date, the aggregate sum of: with respect to any Mortgage Receivable in respect of which any of the Issuer, the Originator, the Servicer or the Security Trustee has completely foreclosed (such that there is no more collateral securing the Mortgage Receivable), in the immediately preceding Notes Calculation Period, the amount by which the aggregate Outstanding Principal Amount of all such Mortgage Receivables 164

165 exceeds the amount of the Net Foreclosure Proceeds applied to reduce the Outstanding Principal Amount of such Mortgage Receivables; and with respect to any Mortgage Receivable in respect of which the Borrower has successfully asserted any set-off or defence to payments or repaid or prepaid any amount in the immediately preceding Notes Calculation Period, the amount by which (x) the aggregate Outstanding Principal Amount of such Mortgage Receivable exceeds (y) the aggregate Outstanding Principal Amount of such Mortgage Receivable, prior to such set-off or defence to payments or repayment or prepayment having been made unless, and to the extent, such amount is received from the Originator or the Seller, or otherwise in accordance with any item of the Available Principal Funds. 165

166 5.4 Liquidity Support Reserve Fund Reserve Fund The Issuer will maintain with the Issuer Account Bank the Reserve Fund Account to which an amount equal to 2 per cent. of the aggregate proceeds of the issue of the Notes and Certificates, on the Closing Date, will be credited, being an amount equal to EUR 3,116,400 (such fund, the Reserve Fund). On each Notes Payment Date the required amount of the Reserve Fund shall be the Reserve Fund Required Amount. The Reserve Fund Required Amount shall be split between the Liquidity Reserve Fund Required Amount and the Non-Liquidity Reserve Fund Required Amount. On each Notes Payment Date certain amounts to the extent available in accordance with the Revenue Priority of Payments will be transferred to the Reserve Fund Account up to the Reserve Fund Required Amount. Amounts credited to the Liquidity Reserve Fund Ledger will be available on any Notes Payment Date to meet items (a) to (c) (inclusive) of the Revenue Priority of Payments which are due to be made on that Notes Payment Date after all other amounts available to the Issuer for such purpose (except item (h) of Available Revenue Funds) have been used or shall be used on such Notes Payment Date, before application of any funds drawn from the Liquidity Reserve Fund Actual Amount. The Reserve Fund Actual Amount will be deposited in the Reserve Fund Account (with a corresponding credit being made to the Reserve Fund Ledger). If required, amounts drawn under the Non-Liquidity Reserve Fund Ledger will be applied by the Issuer or the Issuer Administrator on its behalf as Available Revenue Funds, to replenish to the Reserve Fund, to the extent required, until the balance standing to the credit of the Reserve Fund equals the Reserve Fund Required Amount, if and to the extent that the Available Revenue Funds on any Notes Calculation Date exceed the amounts required to meet items ranking higher than item (l) in the Revenue Priority of Payments. On and after the Final Rated Notes Redemption Date, the Reserve Fund Required Amount and the Liquidity Reserve Fund Required Amount will be reduced to zero and any amount standing to the credit of the Reserve Fund will thereafter form part of the Available Principal Funds. 166

167 5.5 Transaction Accounts Issuer Accounts Issuer Collection Account The Issuer will maintain with the Issuer Account Bank, the Issuer Collection Account to which, among other things, all amounts received in respect of the Mortgage Receivables and from the other parties to the Transaction Documents will be credited. The Issuer Administrator will identify all amounts paid into the Issuer Collection Account, including the amounts received set out under and above, in respect of the Mortgage Receivables. The amount standing to the credit of the Issuer Collection Account will accrue interest at a level agreed with the Issuer Account Bank. The Servicer will pay or procure that the Collection Foundation will transfer, to the Issuer on each Mortgage Collection Payment Date and at least on a weekly basis after that (or at such other times as the Issuer Administrator and the Issuer may agree from time to time), all proceeds received during the immediately preceding Mortgage Calculation Period in respect of the relevant Mortgage Receivables. The Issuer Administrator will identify all amounts paid into the Issuer Collection Account in respect of the Mortgage Receivables by crediting such amounts to ledgers established by the Issuer Administrator for such purpose. Payments received on each relevant Mortgage Collection Payment Date in respect of the Mortgage Receivables will be identified as principal or revenue receipts and credited to the relevant principal ledger or the revenue ledger, as the case may be. Payments may be made from the Issuer Collection Account (other than on a Notes Payment Date) to satisfy amounts due to third parties (other than pursuant to the Transaction Documents) and under obligations incurred in connection with the Issuer s business. Reserve Fund Account The Issuer will maintain with the Issuer Account Bank the Reserve Fund Account to which on the Closing Date, the Reserve Fund Required Amount will be credited. The Issuer will on each Notes Payment Date replenish the Reserve Fund Account up to the Reserve Fund Required Amount, to the extent that funds are available in accordance with the Revenue Priority of Payments. Rating Issuer Account Bank If at any time the rating of the Issuer Account Bank falls below the Requisite Credit Rating (Issuer Account Bank) or any such rating is withdrawn by any Credit Rating Agency, the Issuer will be required within the Relevant Remedy Period to transfer the balance standing to the credit of the relevant Issuer Accounts to an alternative issuer account bank having at least the Requisite Credit Rating (Issuer Account Bank) or to obtain a third party with at least the Requisite Credit Rating (Issuer Account Bank) to guarantee the obligations of the Issuer Account Bank or (iii) find another solution in accordance with the methodology of the Credit Rating Agencies at such time in order to maintain the then current ratings assigned to the Rated Notes. 167

168 5.6 Administration Agreement Issuer Services In the Administration Agreement, the Issuer Administrator will agree to provide certain administration, calculation and cash management services to the Issuer, including, among other things, the application of amounts received by the Issuer to the Issuer Accounts and the production of quarterly reports in relation to such amounts and Issuer Accounts, procuring that all payments to be made by the Issuer under the Transaction Documents are made, (iii) procuring that all payments to be made by the Issuer under the Notes are made in accordance with the Paying Agency Agreement and the Conditions, (iv) the maintaining of all required ledgers in connection with the above, (v) all administrative actions in relation thereto, (vi) procuring that all calculations to be made pursuant to the Conditions are made and (vii) to submit certain statistical information regarding the Issuer as referred to above to certain governmental authorities if and when requested. Furthermore, under the Administration Agreement the Issuer Administrator will act as designated reporting entity in respect of the Notes and Certificates issued by the Issuer for the purposes of Article 8b of the CRA Regulation and the corresponding implementing measures from time to time (including the disclosure and reporting requirements under articles 3 to 7 of Regulation (EU) No. 2015/3). Termination The Administration Agreement may be terminated by the Issuer and the Issuer and the Security Trustee, acting jointly, upon the occurrence of certain termination events, including a failure by the Issuer Administrator to comply with its obligations (unless remedied within the applicable grace period), dissolution or liquidation of the Issuer Administrator or the Issuer Administrator being declared bankrupt or granted a suspension of payments. In addition the Administration Agreement may be terminated by the Issuer Administrator and by the Issuer upon the expiry of not less than 12 months notice, subject to (among other things) written approval of the Security Trustee, which approval may not be unreasonably withheld, appointment of a substitute administrator and (iii) Credit Rating Agency Confirmation. A termination of the Administration Agreement by either the Issuer and the Security Trustee or the Issuer Administrator will only become effective if the Back-Up Issuer Administrator, or another substitute administrator is appointed. On the terms and subject to the conditions of the Administration Agreement, if the Issuer Administrator defaults in the performance of the Issuer Services, it will be replaced by the Back-Up Issuer Administrator. Calculations and reconciliation The Issuer Administrator will calculate the amounts available to the Issuer on the basis of information received by it, including the Mortgage Reports provided by the Servicer for each Notes Calculation Period. If on any Mortgage Report Date no Mortgage Report is delivered to the Issuer Administrator by the Servicer in accordance with the Servicing Agreement, the Issuer Administrator will use all reasonable endeavours to make all determinations, necessary in order for the Issuer Administrator to continue to perform the Issuer Services, as further set out in the Trust Deed and the Administration Agreement. The Issuer Administrator will make such determinations until such time it receives from the Servicer or a replacement servicer the Mortgage Report. Upon receipt by the Issuer Administrator of such Mortgage Report, the Issuer Administrator will apply the reconciliation calculations as further set out in the Administration Agreement in respect of payments made as a result of determinations made by the Issuer Administrator during the period when no Mortgage Report was available and will debit or credit the underpaid or overpaid amounts to the relevant Reconciliation Ledger, which amounts will be deducted or added to the Available Revenue Funds or the Available Principal Funds, as applicable. 168

169 Any calculations properly done in accordance with the Trust Deed and in accordance with the Administration Agreement, and payments made and payments not made under any of the Notes, Certificates and Transaction Documents in accordance with such calculations and (iii) reconciliation calculations and reconciliation payments made or payments not made as a result of such reconciliation calculations, each in accordance with the Administration Agreement, will be deemed to be done, made or not made in accordance with the provisions of the Transaction Documents and will in themselves not lead to an event of default or any other default or termination event under any of the Transaction Documents or breach of any triggers included in the Transaction Documents (including, Assignment Notification Events and Pledge Notification Events). MAD Regulations The Directive 2014/57/EU of 16 April 2014 (the Market Abuse Directive), the Regulation 596/2014 of 16 April 2014 (the Market Abuse Regulation) and the Dutch legislation implementing these Directives (the Market Abuse Directive, Market Abuse Regulation and the Dutch implementing legislation together referred to as the MAD Regulations), among other things, impose on the Issuer the obligations to disclose inside information and to maintain a list of persons that act on behalf of or for the account of the Issuer and who, on a regular basis, have access to inside information in respect of the Issuer. The Issuer Administrator has accepted the tasks of maintaining the list of insiders and to organise the assessment and disclosure of inside information, if any, on behalf of the Issuer. The Issuer Administrator shall have the right to consult with the Servicer and any legal counsel, accountant, banker, broker, securities company or other company other than the Credit Rating Agencies and the Security Trustee in order to analyse whether the information can considered to be inside information which must be disclosed in accordance with the MAD Regulations. If disclosure is required, the Issuer Administrator shall procure the publication of such information in accordance with the MAD Regulations. Notwithstanding the delegation of compliance with the MAD Regulations to the Issuer Administrator, the Issuer shall ultimately remain legally responsible and liable for such compliance. 169

170 6. PORTFOLIO INFORMATION 6.1 Stratification Tables The numerical information set out below relates to the provisional pool which was selected on 31 October 2016 (the Provisional Pool), as at such date (the Provisional Pool Date). Therefore, the information set out below in relation to the Provisional Pool may not necessarily correspond to the details of the Mortgage Receivables actually sold and assigned on the Closing Date. Furthermore, after the Closing Date, the portfolio will change from time to time as a result of repayment, prepayment and amendment of the Mortgage Receivables. The Mortgage Loans in the final pool will be selected on or before the Closing Date from the Provisional Pool of Mortgage Loans that has been selected in accordance with the criteria in the Mortgage Receivables Purchase Agreement (the Final Pool). The Final Pool will have the same general characteristics as the Provisional Pool. However, there can be no assurance that on the date of purchase by the Issuer, the characteristics of the Final Pool will correspond with the exact same characteristics in the Provisional Pool. Key Characteristics As per reporting date Principal amount 157,725, Number of loans 820 Number of loanparts 874 Number of negative loanparts 0 Average principal balance (borrower) 192,348 Weighted average current interest rate 3.02% Weighted average maturity (in years) Weighted average remaining time to interest reset (in years) 0.09 Weighted average seasoning (in years) 9.04 Weighted average CLTOMV 97.66% Weighted average CLTIMV % Weighted average OLTOMV Loans greater than 1 month in arrears Redemption Type Net Principal Balance Weighted Average Coupon Weighted Average Maturity 98.32% 10.66% Weighted Average CLTOMV % of Nr of % of Description Total Loanparts Total Annuity 401, % % 3.40% % Interest Only 156,340, % % 3.01% % Life Insurance 983, % % 3.41% % Total 157,725, % % 3.02% % 170

171 Outstanding Loan Amount Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of From(>) To(<=) Total Loans Total <= 25,000 10, % % 0.58% % 25,000 50, , % % 1.49% % 50,000 75, , % % 2.26% % 75, ,000 3,681, % % 2.69% % 100, ,000 25,299, % % 3.06% % 150, ,000 42,726, % % 3.03% % 200, ,000 35,541, % % 3.05% % 250, ,000 27,260, % % 3.05% % 300, ,000 11,522, % % 3.10% % 350, ,000 5,538, % % 2.79% % 400, ,000 4,171, % % 2.57% % 450, , , % % 2.37% % 500, , , % % 4.13% % 550,000 > % % 0.00% % Total 157,725, % % 3.02% % Average 192,348 Minimum 10,420 Maximum 531,000 Origination Year Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of From(>) To(<=) Total Loanparts Total < % % 0.00% % % % 0.00% % ,739, % % 3.56% % ,737, % % 3.02% % ,248, % % 2.73% % % % 0.00% % 2010 >= % % 0.00% % Unknown % % 0.00% % Total 157,725, % % 3.02% % Weighted Average 2007 Minimum 2006 Maximum 2008 Seasoning Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of From(>) To(<=) Total Loanparts Total < 8 years % % 0.00% % 8 years 9 years 72,155, % % 2.95% % 9 years 10 years 82,274, % % 3.05% % 10 years 11 years 3,296, % % 3.66% % 11 years >= % % 0.00% % Unknown % % 0.00% % Total 157,725, % % 3.02% % Weighted Average 9.04 Minimum 8.75 Maximum

172 Legal Maturity Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of From(>) To(<=) Total Loanparts Total , % % 3.32% % , % % 3.05% % ,790, % % 3.02% % ,093, % % 3.48% % ,596, % % 2.99% % ,587, % % 3.00% % 2040 >= % % 0.00% % Unknown % % 0.00% % Total 157,725, % % 3.02% % Weighted Average 2036 Minimum 2011 Maximum 2038 Remaining Tenor Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of From(>) To(<=) Total Loanparts Total < 1 year 964, % % 3.21% % 1 year 2 years 175, % % 3.38% % 2 years 3 years 320, % % 3.62% % 3 years 4 years 608, % % 3.29% % 4 years 5 years 323, % % 3.58% % 5 years 6 years 912, % % 2.46% % 6 years 7 years 583, % % 2.70% % 7 years 8 years 1,268, % % 3.29% % 8 years 9 years 1,154, % % 2.96% % 9 years 10 years 1,201, % % 3.75% % 10 years 11 years 1,005, % % 3.51% % 11 years 12 years 25, % % 1.88% % 12 years 13 years % % 0.00% % 13 years 14 years % % 0.00% % 14 years 15 years 612, % % 3.05% % 15 years 16 years 975, % % 2.66% % 16 years 17 years 179, % % 3.38% % 17 years 18 years 269, % % 3.12% % 18 years 19 years 698, % % 3.41% % 19 years 20 years 2,569, % % 3.56% % 20 years 21 years 47,810, % % 3.15% % 21 years 22 years 96,067, % % 2.92% % 22 years >= % % 0.00% % Unknown % 0.00% % Total 157,725, % % 3.02% % Weighted Average Minimum Maximum

173 Original Loan to Original Market Value Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of From(>) To(<=) Total Loans Total < 10% % % 0.00% % 10% 20% 55, % % 1.13% % 20% 30% 320, % % 1.76% % 30% 40% 752, % % 1.71% % 40% 50% 895, % % 1.46% % 50% 60% 4,723, % % 1.47% % 60% 70% 4,760, % % 2.14% % 70% 80% 7,924, % % 2.29% % 80% 90% 18,783, % % 2.80% % 90% 100% 31,843, % % 2.85% % 100% 110% 44,495, % % 2.95% % 110% 120% 43,172, % % 3.76% % 120% >= % % 0.00% % Total 157,725, % % 3.02% % Weighted Average 98.32% Minimum 18.33% Maximum % Current Loan to Original Market Value Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of From(>) To(<=) Total Loans Total < 10% 10, % % 0.58% % 10% 20% 55, % % 1.13% % 20% 30% 543, % % 1.82% % 30% 40% 664, % % 1.72% % 40% 50% 860, % % 1.48% % 50% 60% 4,846, % % 1.49% % 60% 70% 4,996, % % 2.18% % 70% 80% 8,750, % % 2.36% % 80% 90% 19,527, % % 2.81% % 90% 100% 32,955, % % 2.86% % 100% 110% 43,224, % % 2.99% % 110% 120% 41,291, % % 3.76% % 120% > % % 0.00% % Total 157,725, % % 3.02% % Weighted Average 97.66% Minimum 4.17% Maximum % 173

174 Current Loan to Indexed Market Value Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of From(>) To(<=) Total Loans Total < 10% 10, % % 0.58% % 10% 20% 55, % % 1.13% % 20% 30% 462, % % 2.04% % 30% 40% 445, % % 1.22% % 40% 50% 837, % % 1.81% % 50% 60% 2,722, % % 1.59% % 60% 70% 3,433, % % 1.38% % 70% 80% 6,685, % % 2.52% % 80% 90% 10,173, % % 2.51% % 90% 100% 17,827, % % 2.81% % 100% 110% 34,313, % % 2.92% % 110% 120% 46,844, % % 3.22% % 120% 130% 28,579, % % 3.50% % 130% 140% 5,333, % % 3.69% % 140% > % % 0.00% % Total 157,725, % % 3.02% % Weighted Average % Minimum 4.20% Maximum % Loanpart Coupon (interest rate bucket) Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of From(>) To(<=) Total Loanparts Total < 0.50% % % 0.00% % 0.50% 1.00% 3,257, % % 0.83% % 1.00% 1.50% 5,639, % % 1.30% % 1.50% 2.00% 18,954, % % 1.81% % 2.00% 2.50% 22,614, % % 2.25% % 2.50% 3.00% 25,401, % % 2.79% % 3.00% 3.50% 27,924, % % 3.33% % 3.50% 4.00% 25,065, % % 3.70% % 4.00% 4.50% 26,112, % % 4.20% % 4.50% 5.00% 2,004, % % 4.84% % 5.00% 5.50% 112, % % 5.01% % 5.50% 6.00% 637, % % 5.80% % 6.00% > % % 0.00% % Unknown % % 0.00% % Total 157,725, % % 3.02% % Weighted Average 3.02% Minimum 0.58% Maximum 6.00% Remaining Interest Rate Fixed Period Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of From(>) To(<=) Total Loanparts Total < 12 months 290, % % 5.55% % 12months 24 months 347, % % 6.00% % 24months > % % 0.00% % Total 637, % % 5.80% % Weighted Average Minimum 9.40 Maximum

175 Interest Payment Type Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of Description Total Loanparts Total Fixed 637, % % 5.80% % Floating 157,088, % % 3.00% % Unknown % % 0.00% % Total 157,725, % % 3.02% % Property Description Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of Description Total Loans Total House 124,129, % % 2.97% % Appartment 33,345, % % 3.18% % House/Business (<50%) % % 0.00% % House/Business (>=50%) % % 0.00% % Business % % 0.00% % Other 250, % % 4.20% % Total 157,725, % % 3.02% % Geographical Distribution (by province) Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of Description Total Loans Total Drenthe 5,703, % % 2.85% % Flevoland 11,129, % % 3.02% % Friesland 4,048, % % 3.23% % Gelderland 10,906, % % 2.65% % Groningen 3,862, % % 3.20% % Limburg 10,454, % % 3.13% % Noord-Brabant 15,587, % % 2.82% % Noord-Holland 31,882, % % 3.15% % Overijssel 6,677, % % 3.04% % Utrecht 9,254, % % 2.91% % Zeeland 3,555, % % 3.00% % Zuid-Holland 44,661, % % 3.06% % Unspecified % % 0.00% % Total 157,725, % % 3.02% % Occupancy Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of Description Total Loanparts Total Owner Occupied 157,725, % % 3.02% % Total 157,725, % % 3.02% % Employment Status Borrower Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of Description Total Loans Total Employed 123,239, % % 3.04% % Self Employed 24,296, % % 3.05% % Other 9,100, % % 2.46% % Unknown 1,089, % % 3.72% % Total 157,725, % % 3.02% % 175

176 Loan to Income Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of From(>) To(<=) Total Loans Total < , % % 0.58% % % % 0.00% % , % % 2.84% % , % % 2.76% % , % % 2.41% % ,781, % % 2.48% % ,988, % % 3.23% % ,834, % % 2.80% % ,511, % % 3.20% % ,042, % % 3.01% % ,534, % % 2.92% % ,505, % % 2.98% % ,980, % % 3.09% % ,785, % % 3.20% % 7.0 > 57,445, % % 3.03% % Unknown 1,420, % % 2.82% % Total 157,725, % % 3.02% % Weighted Average 6.45 Minimum 0.45 Maximum Debt Service to Income Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of From(>) To(<=) Total Loans Total < 1% 32,331, % % 1.97% % 1% 2% 81,108, % % 3.08% % 2% 3% 32,566, % % 3.59% % 3% 4% 7,385, % % 3.95% % 4% 5% 1,947, % % 3.80% % 5% 6% 655, % % 4.94% % 6% 7% 310, % % 4.23% % 7% 8% % % 0.00% % 8% 9% % % 0.00% % 9% 10% % % 0.00% % 10% 15% % % 0.00% % 15% 20% % % 0.00% % 20% 25% % % 0.00% % 25% 30% % % 0.00% % 30% > % % 0.00% % Unknown 1,420, % % 2.82% % Total 157,725, % % 3.02% % Weighted Average 1.64% Minimum 0.03% Maximum 6.51% Loanpart Payment Frequency Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of Description Total Loanparts Total Monthly 157,725, % % 3.02% % Total 157,725, % % 3.02% % 176

177 Originator Originator Net Principal Balance % of Total Nr of Loanparts % of Total Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV ELQ Portefeuille 1 B.V. 157,725, % % 3.02% % Total 157,725, % % 3.02% % Servicer Net Principal Balance Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV % of Nr of % of Servicer Total Loanparts Total Adaxio B.V. 157,725, % % 3.02% % Total 157,725, % % 3.02% % Months in Arrears Months From ( > ) Months Until ( <= ) Weighted Average Coupon Weighted Average Maturity Weighted Average CLTOMV Net Principal Balance % of Total Nr of Loans % of Total 0 129,604, % % 2.97% % ,302, % % 3.24% % 1 2 3,778, % % 3.27% % 2 3 2,132, % % 3.29% % 3 6 2,318, % % 2.94% % ,680, % % 3.17% % > 12 4,908, % % 3.33% % Total 157,725, % % 3.02% % Weighted Average 1.23 Minimum 0.00 Maximum

178 6.2 Description of Mortgage Loans The Mortgage Loans (or in case of Mortgage Loans consisting of more than one loan part (leningdelen), the aggregate of such loan parts) are secured by a first-ranking or, as the case may be, a first and sequentially lower ranking, mortgage right, evidenced by notarial mortgage deeds. The mortgage rights secure the relevant Mortgage Loans and are vested over property situated in the Netherlands. The Mortgage Loans and the mortgage rights securing the liabilities arising from such Mortgage Loans are governed by Dutch law. Mortgage Loan Types The Mortgage Loans (or any loan parts comprising a Mortgage Loan) may consist of any of the following types of redemption: (iii) (iv) (v) Life Mortgage Loans (levenhypotheken); Linear Mortgage Loans (lineaire hypotheken); Annuity Mortgage Loans (annuïteitenhypotheken); Interest-only Mortgage Loans (aflossingsvrije hypotheken); and Mortgage Loans which combine any of the above mentioned types of mortgage loans. Mortgage Loan Type Life Mortgage Loans: Linear Mortgage Loans: Annuity Mortgage Loans: Description A portion of the Mortgage Loans (or parts of them) will be in the form of Life Mortgage Loans. Life Mortgage Loans are mortgage loans which are connected to a combined risk and capital insurance policy taken out by the Borrower under which the Borrower builds up capital which it can use to redeem the mortgage loan at maturity. Instead of principal payments, the Borrower pays to the relevant Insurance Company a premium, either on an instalment basis or up front. The premium consists of a risk insurance element and a capital insurance element. The risk insurance element of the premium is paid under the policy, in exchange for the undertaking of the Insurance Company to pay out an agreed amount upon the death of the insured, which may not always be the Borrower. The capital insurance element of the premium is used by the Insurance Company to build up capital. It is the intention, but not the obligation of the Borrower, that the capital is applied towards redemption of the principal amount at maturity thereof. The capital elements of the premiums paid by the Borrowers are invested by the Insurance Company in certain funds. Failure by the Borrower to pay the premium under the Life Insurance Policy would result in the Mortgage Receivable becoming due and payable (opeisbaar). A portion of the Mortgage Loans (or parts of them) will be in the form of Linear Mortgage Loans. Under a Linear Mortgage Loan the Borrower redeems a fixed amount on each instalment, such that at maturity the entire loan will be redeemed. The Borrower s payment obligation decreases with each payment as interest owed under such Mortgage Loan declines over time. A portion of the Mortgage Loans (or parts of them) will be in the form of Annuity Mortgage Loans. Under an Annuity Mortgage Loan the Borrower 178

179 pays a constant total monthly payment, made up of an initially high and subsequently decreasing interest portion and an initially low and subsequently increasing principal portion, and calculated in such a manner that such Mortgage Loan will be fully redeemed at the end of its term. Interest-only Mortgage Loans: A portion of the Mortgage Loans (or parts of them) will be in the form of Interest-only Mortgage Loans. Under an Interest-only Mortgage Loan, the Borrower is not obliged to pay principal towards redemption of the relevant Mortgage Loan (or relevant part of it) until maturity. Interest is payable monthly and is calculated on the principal balance of the Mortgage Loan (or relevant part of it). 179

180 6.3 Origination and Servicing Origination The Mortgage Loans have been originated by ELQ Portefeuille I B.V.. Servicing Collections All monthly payments of principal and interest on the Mortgage Receivables are collected from Borrowers by direct debit. The Interim Sub-MPT Servicer has been authorised by each Borrower with a right of substitution to draw the monthly payments from such Borrower s bank account directly into the Collection Foundation Account. The Interim Sub-MPT Servicer s servicing system automatically collects the payments 2 business days before the end of each month. A direct debit payment will always be linked to the appropriate mortgage loan. However, if the system does not recognise the Borrower, the payment is allocated manually to a mortgage loan. Payment information is monitored on a daily basis by the Servicer s cash management and special servicing employees. Arrears procedure Every day the Interim Sub-MPT Servicer s servicing system detects and keeps track of all arrears and, to the extent that the Interim Sub-MPT Servicing Agreement has not been terminated, all relevant data is provided by the Interim Sub-MPT Servicer s servicing system to the Servicer. Within 5 days of being notified that the Borrower has missed a payment, the Servicer will endeavour to contact the relevant Borrower using a combination of phone calls and letters. If the Servicer is not able to contact such Borrower, the Servicer will try to contact the employer, intermediary or other parties related to such Borrower. In such circumstances, the Servicer sends reminder letters and in certain circumstances an SMS as well. If a Borrower does not pay or react within the set time, the Servicer may send such Borrower a letter advising them that it will be arranging for a valuation. If there is still no contact through either phone calls or letters, the Servicer may send a field agent to visit the relevant Borrower. If this is not successful, then the Servicer will hand the file over to the bailiff. Throughout the process the Servicer will work with the relevant Borrower to arrange for full payment of the amount due. In case the Borrower does not cooperate with the Servicer, the Servicer will send an instruction to a bailiff to attach the income and other assets of the Borrower. In addition, to avoid an auction and arrange a private sale instead, the Servicer will ask the Borrower to sign a power of attorney providing them with the authority to sell the relevant mortgaged property. As each case is treated and assessed on a case-by-case basis, it is possible for the timing of the actions described above to change. As the Seller has, as a first ranking mortgagee, an executorial title (executoriale titel), it does not have to obtain permission from the court prior to foreclosure if the Borrower fails to fulfil his/her obligations and no other solutions are reached. The Servicer can, on behalf of the Seller, sell the property either through a public sale (auction) or private sale (where it has been provided with a mandate by the Borrower). If the proceeds do not fully cover the Seller s claims, the outstanding amount still has to be paid by the Borrower. Outstanding Amounts If amounts are still outstanding after the sale of the property has been completed, the Servicer, on behalf of the Seller, continues to manage the remaining receivables if it considers it likely that it will be able to 180

181 recover such losses. These amounts still have to be repaid by the Borrower. If possible a settlement agreement will be entered into between the Borrower and the Servicer. If the Borrower does not comply with the settlement agreement or does not wish to cooperate with the Servicer on finding a solution to repay the unpaid amounts, other measures can be taken, such as attachments on assets of the debtor. Enforcement Procedures The Servicer has procedures for managing loans that are in arrears (such procedures, the Enforcement Procedures), including early contact with Borrowers in order to find a solution to any financial difficulties they may be experiencing. These same procedures, as from time to time varied in accordance with the practice of a prudent mortgage lender, will continue to be applied in respect of arrears arising on the Mortgage Loans in the Mortgage Pool. The Servicer carries out detailed daily and monthly analyses of the Mortgage Pool and arrears. Borrowers who fail to make payments when due are contacted by the Servicer s collection staff by telephone and letters. This contact is maintained by reminder letters and telephone calls during the course of the next month. Depending on the results of initial contacts, the Borrower may receive multiple calls and letters during delinquency. Through such contact, the Servicer will endeavour to collect the outstanding monthly payment in full. However, if the Borrower is unable to make such payment in full, the Servicer will require the Borrower to make an immediate payment towards part of the due amount. If the Borrower is not able to make a partial payment, the Servicer will investigate and, if possible, execute other measures in order to collect the outstanding amounts. Administration of the Mortgage Portfolio Under the Servicing Agreement, among other things, the Servicer will agree to provide the services as specified in the Servicing Agreement in relation to the Mortgage Loans, on a day-to-day basis, including, collecting and monitoring payments on the Mortgage Loans and formally discharging any Mortgage Loan upon redemption. The Servicer shall exercise such discretion as is vested in it under the Servicing Agreement for the purpose of administering the Mortgage Portfolio as would be exercised by a reasonable and prudent provider of services such as the services to be provided by the Servicer under the Servicing Agreement, and each of the other Transaction Documents to which the Servicer is a party. Under the Servicing Agreement, among other things, the Issuer shall delegate its rights in respect of interest rate setting in relation to the Mortgage Loans to the Servicer. The Servicer will be entitled to charge a fee for its services under the Servicing Agreement, payable in arrears on each Notes Payment Date and subject to the relevant Priority of Payments. As of the Closing Date, the Servicer will hold certain of the Certificates and be entitled to receive any amounts due under such Certificates from time to time. The appointment of the Servicer may be terminated by the Issuer (with the consent of the Security Trustee) or the Security Trustee on the occurrence of certain events, including: a default by the Servicer under the Servicing Agreement; and insolvency or similar events occur in relation to the Servicer. 181

182 On the terms and subject to the conditions of the Servicing Agreement, the Issuer will appoint the Back-Up Servicer Facilitator, to facilitate the appointment of a replacement servicer in the event that the appointment of the Servicer is terminated under and in accordance with the Servicing Agreement. Under the Interim Sub-MPT Servicing Agreement, among other things, the Interim Sub-MPT Servicer will agree to provide until 31 December 2017 (or such other period agreed between the Interim Sub-MPT Servicer and the Servicer), certain of the mortgage loan collection and payment transaction services in relation to the Mortgage Loans (such services, the Interim Sub-MPT Services). In addition, the Interim Sub-MPT Servicer has undertaken to the Servicer to transfer the Interim Sub-MPT Services to the Servicer such that the Servicer will from the relevant date of transfer undertake and perform the Mortgage Loan Services. 182

183 6.4 Dutch Residential Mortgage Market The Dutch residential mortgage debt stock is relatively sizeable, especially when compared to other European countries. Since the 1990s, the mortgage debt stock of Dutch households has grown considerably, mainly on the back of mortgage lending on the basis of two incomes in a household, the introduction of taxefficient product structures such as mortgage loans with deferred principal repayment vehicles and interestonly mortgage loans, financial deregulation and increased competition among originators. Moreover, Loan to-value (LTV) ratios have been relatively high, as the Dutch tax system implicitly discouraged amortisation, due to the tax deductibility of mortgage interest payments. The mortgage debt growth continued until Q3 2012, when total Dutch mortgage debt stock peaked at EUR 672 billion 1. The correction on the housing market caused a modest decline in mortgage debt in subsequent years, but as the market has been recovering rapidly since 2013, there is recently again a tendency to higher debt growth visible. In Q2 2016, the mortgage debt stock of Dutch households equalled EUR 662 billion 2. This represents a rise of EUR 9.7 billion compared to Q and follows two years of a slight fall. Tax system The Dutch tax system plays an important role in the Dutch mortgage market, as it allows for almost full deductibility of mortgage interest payments from taxable income. This tax system has been around for a very long time, but financial innovation has resulted in a greater leverage of this tax benefit. From the 1990s onwards until 2001, this tax deductibility was unconditional. In 2001 and 2004, several conditions have been introduced to limit the usage of tax deductibility, including a restriction of tax deductibility to (mortgage interest payments for) the borrower s primary residence and a limited duration of the deductibility of 30 years. A further reform of the tax system was enforced on 1 January Since this date, all new mortgage loans have to be repaid in full in 30 years, at least on an annuity basis, in order to be eligible for tax relief (linear mortgage loans are also eligible). The tax benefits on mortgage loans, of which the underlying property was bought before 1 January 2013, have remained unchanged and are grandfathered, even in case of refinancing and relocation. As such, new mortgage originations still include older loan products, including interest-only. However, any additional loan on top of the borrower s grandfathered product structure, has to meet the mandatory full redemption standards to allow for tax deductibility. Another reform imposed in 2013 to reduce the tax deductibility is to lower the maximum deduction percentage. This used to be equal to the highest marginal tax bracket (52 per cent.), but since 2013 the maximum deduction is lowered by 0.5 per cent. per annum to 38.0 per cent. in 2042 (2016: 50.5 per cent.). There are several housing-related taxes which are linked to the fiscal appraisal value ( WOZ ) of the house, both imposed on national and local level. Moreover, a transfer tax (stamp duty) of 2 per cent. is applied when a house changes hands. Although these taxes partially unwind the benefits of tax deductibility of interest payments, and several restrictions to this tax deductibility have been applied, tax relief on mortgage loans is still substantial. Loan products The Dutch residential mortgage market is characterised by a wide range of mortgage loan products. In general, three types of mortgage loans can be distinguished. Firstly, the classical Dutch mortgage product is an annuity loan. Annuity mortgage loans used to be the norm until the beginning of the 1990s, but they have returned as the most popular mortgage product in recent years. Reason for this return of annuity mortgage loans is the tax system. Since 2013, tax deductibility of 1 Statistics Netherlands, household data. 2 Statistics Netherlands, household data. 183

184 interest payments on new loans is conditional on full amortisation of the loan within 30 years, for which only (full) annuity and linear mortgage loans qualify. Secondly, there is a relatively big presence of interest-only mortgage loans in the Dutch market. Full interestonly mortgage loans were popular in the late nineties and in the early years of this century. Mortgage loans including an interest-only loan part were the norm until 2013, and even today, grandfathering of older tax benefits still results in a considerable amount of interest-only loan origination. Thirdly, there is still a big stock of mortgage products including deferred principal repayment vehicles. In such products, capital is accumulated over time (in a tax-friendly manner) in a linked account in order to take care of a bullet principal repayment at maturity of the loan. The principal repayment vehicle is either an insurance product or a bank savings account. The latter structure has been allowed from 2008 and was very popular until Mortgage loan products with insurance-linked principal repayment vehicles used to be the norm prior to 2008 and there is a wide range of products present in this segment of the market. Most structures combine a life-insurance product with capital accumulation and can be relatively complex. In general, however, the capital accumulation either occurs through a savings-like product (with guaranteed returns), or an investment-based product (with non-guaranteed returns). A typical Dutch mortgage loan consists of multiple loan parts, e.g. a bank savings loan part that is combined with an interest-only loan part. Newer mortgage loans, in particular those for first-time buyers after 2013, are full annuity and often consists of only one loan part. Nonetheless, tax grandfathering of older mortgage loan product structures still results in the origination of mortgage loans including multiple loan parts. Most interest rates on Dutch mortgage loans are not fixed for the full duration of the loan, but they are typically fixed for a period between 5 and 15 years. Rate term fixings differ by vintage, however. More recently, there has been a bias to longer term fixings (10-20 years). Most borrowers remain subject to interest rate risk, but compared to countries in which floating rates are the norm, Dutch mortgage borrowers are relatively well-insulated against interest rate fluctuations. Underwriting criteria Most of the Dutch underwriting standards follow from special underwriting legislation ( Tijdelijke regeling hypothecair krediet ). This law has been present since 2013 and strictly regulates maximum LTV and Loan to-income (LTI) ratios. The current maximum LTV is 102 per cent. (including all costs such as stamp duties), but it will be gradually lowered to 100 per cent. by 2018, by 1 per cent. per annum. LTI limits are set according to a fixed table including references to gross income of the borrower and mortgage interest rates. This table is updated annually by the consumer budget advisory organisation NIBUD and ensures that income after (gross) mortgage servicing costs is still sufficient to cover normal costs of living. Prior to the underwriting legislation, the underwriting criteria followed from the Code of Conduct for Mortgage Lending, which is the industry standard. This code, which limits the risk of over crediting, has been tightened several times in the past decade. The 2007 version of the code included a major overhaul and resulted in tighter lending standards, but deviation in this version was still possible under the explain clause 3. In 2011, another revised and stricter version of the Code of Conduct was introduced. Moreover, adherence to the comply option was increasingly mandated by the Financial Markets Authority (AFM). Although the Code of Conduct is currently largely overruled by the underwriting legislation, it is still in force. The major restriction it currently regulates, in addition to the criteria in the underwriting legislation, is the cap of interest-only loan parts to 50 per cent. of the market value of the residence. This cap was introduced in 2011 and is in principle applicable to all new mortgage contracts. A mortgage lender may however diverge from the cap limitation if certain conditions have been met. 3 Under the explain clause it is in exceptional cases possible to deviate from the loan-to-income and loan-to-value rules set forth in the Code of Conduct. 184

185 Recent developments in the Dutch housing market The Dutch housing market has shown clear signs of recovery since the second half of Important factors are among others the economic recovery, high consumer confidence and low mortgage rates. Existing house prices (PBK-index) in Q rose by 2.5 per cent. compared to Q Compared to Q this was 5.6 per cent., the sharpest rise since early Nonetheless, by comparison with the peak in 2008, the average price drop amounts to 12 per cent. The continued increase in house prices is in line with the rise in sales numbers. Compared to a year ago, sales numbers rose by 21 per cent. The twelve month total of existing home sales now stands at 206,354, which is roughly in line with pre-crisis levels. Forced sales Compared to other jurisdictions, performance statistics of Dutch mortgage loans show relatively low arrears and loss rates 4. The most important reason for default is relationship termination, although the increase in unemployment following the economic downturn in recent years is increasingly also a reason for payment problems. The ultimate attempt to loss recovery to a defaulted mortgage borrower is the forced sale of the underlying property. For a long time, mortgage servicers opted to perform this forced sale by an auction process. The advantage of this auction process is the high speed of execution, but the drawback is a discount on the selling price. In Q3 2016, only 397 sales were forced, which is 0.65 per cent. of the total number of sales in this period. 4 Comparison of S&P RMBS index delinquency data. 185

186 Chart 1: Total mortgage debt Chart 2: Sales and prices Source: Statistics Netherlands, Rabobank Source: Statistics Netherlands, Rabobank Chart 3: Price index development Chart 4: Interest rate on new mortgage loans Source: Statistics Netherlands, Rabobank Source: Dutch Central Bank Chart 5: New mortgage loans by interest type Chart 6: Confidence points to rise in sales Source: Dutch Central Bank Source: Delft University OTB, Rabobank 186

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